What about your credit score? Whether you apply for financing for your small business or for a personal purchase, lenders will probably want to check your credit score before determining financing options. If this seems a little off-putting to you, don't be too concerned. The more you know about how your personal and business credit scores are used, the more prepared you’ll be for this sometimes stressful step. What is a personal credit score? A personal credit score is a number intended to serve as an indicator of how likely you are to pay what you owe. It’s based on a number of factors including: how long you’ve maintained a credit-based product (like financing or a credit card) how often you use your credit how quickly you pay back what you owe how many times you’ve been late in paying back what you owe Your personal credit score is expressed as a three-digit number between 350 and 800. The higher the number, the better your credit score is. What is a business credit score? A business credit score is calculated using roughly the same criteria as a personal credit score calculation, but with a few more factors: how long you’ve maintained a credit-based product (like a business loan or a credit card) how often you use your credit, how quickly you pay it back and how many times you pay late how many times you were late paying your rent or your mortgage, your vendor bills or your staff your personal credit score Your business credit score is expressed as a two-digit number between 00 and 99. Again, the higher the number, the better your credit score is. And note that personal credit score is a factor in calculating your business credit score. This isn’t the case the other way around, and the reason it’s a factor is because lenders will want to know that the person they’re trusting with their money has a personal history of responsible debt service. If you’d like to know more about the differences between personal and business credit score, listen to this classic episode of the Business Fuel podcast. Who determine your personal and business credit scores? Personal Business Agencies involved Equifax, Experian, and TransUnion Equifax, Experian, and Dun & Broadstreet Where info comes from Public and court records, credit card issuers, lenders, and collection agencies Public records, lenders, vendors, and personal credit reports of the owners Impact of late payments Payments more than 30 days late appear on the report Both late and early payments are recorded, regardless of how late or early Why will business loan providers look at both personal and business credit scores? Lenders and financiers may be looking for a number of things when checking credit scores, but at the heart of their research is the fact that they're attempting to assess the perceived risk of lending money to the applicant. Credit scores were developed as a fast means of identifying the risk. Note that different lenders may assess risk uniquely — credit scores are not the only factor consider by most lenders. How do good and bad credit scores positively or negatively affect a business? The major benefit of a good credit score is an easier path to securing financing you might need for your business. Frequently, a higher credit score is assigned a lower interest rate because the risk of the applicant is considered lower low risk. It may also be a factor in how much financing your offered and the type of financing, too, while a not-so-perfect credit score is perceived as a greater risk. Can a bad credit score get better? Yes, a bad credit score isn’t like a scarlet letter. Try these tips for improving your business credit score. For personal credit, paying bills on time, paying down credit cards and any outstanding loans, and not applying for credit for a year are just some of the strategies that will have a positive impact on your credit score. Can a company with a bad business credit score still get financing? Whether or not your credit score will allow you to borrow money often depends on the lender and the type of financing offered. Since lender requirements vary, the best way to find out if you're eligible is to apply to see what's available. A financing marketplace like Lendio simplifies the process by starting with a 15-minute online application that doesn't negatively impact the applicant's credit score. Additionally, Lendio's system works with more than 75 lenders and 10+ financing options, so you can find out quickly (and painlessly) what's available to your business. 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