When you’ve opened a new credit card account in the past or wanted to apply for loans like home mortgages or business financing, you’ve probably run into the question of what your credit score is and how it affects how trustworthy you appear to various potential lenders. You probably already know that your credit is a number that sums up your handling of debt, and that it takes multiple factors into consideration for its calculation. These factors can include the number of hard checks you’ve recently had on your credit, the number of accounts you currently have open and your debt-to-credit ratio. If you’re a business owner, though, you might be wondering what the difference is between credit reports for your personal finances and for your company. Understanding the distinction is important for managing separate finances, so here’s how you can differentiate between the two.
They Typically Contain Differing Information
When an agency runs your credit report, the actual information it contains will be different based on the type of report it is. A personal report, for example, will probably include facts like any prior personal bankruptcies you have in the public record, recent hard credit checks and old closed accounts. A business account might, on the other hand, contain your company’s bank account information and relevant sales information.
The Modeling Techniques for Calculating Your Score Can Vary
Another key difference between business and personal credit reports is the modeling technique the agencies may use to calculate your score. These can also vary by lender. However, your score will likely be in a similar range regardless of the exact model used.
They May Be Reported by Different Credit Agencies
Finally, the agencies that actually generate credit reports will likely differ for your business and personal reports. These bureaus usually include, for instance, TransUnion for personal scores and Dun & Bradstreet, among others, for business reports. This is not always the case, however. Some agencies, such as Experian or Equifax, for example, will run both types of reports.
Keeping your personal credit and your business credit score separate is important for multiple reasons, including tax purposes, ease of financial calculations, peace of mind and much more. If you’ve ever wondered what the difference is and why separating business and personal finances matter, you now know how to spot the distinction. Equipped with this information, you can work on improving both scores to get your creditworthiness up.