Entrepreneurs always get confused about the handling of the handling of personal and business credit for their small businesses. Both personal and business credit score go hand in hand in some instances. If you want to get some loans, one of the documents that the lenders will consider is credit history report.
All entrepreneurs should understand the differences and similarities that are there between personal and business credit score and their effect. Here is all that you need to know.
Personal and Business Credit Score Explained
First of all, it is good to know that both an individual and an institution will operate their credit rating separately. These are scores that are assigned to a person by the credit bureau of the country to show your creditworthiness. The higher it is, the better. Both the business and the owner will have their separate rating depending on how they pay bills, credit balances and manage the trade lines.
How They Affect Each Other
At times, both personal and business credit can affect each other. If you want to take a small loan for the business, your personal credit score will play a part. Further, there are some business credit card lenders who ask for a personal credit score of the entrepreneur before they give the limit or even allow you to have the credit card.
Experts from Boostcredit101, a website that offers guidelines on credit scores, advocates for keeping both the personal and business credit score in good shape at all times. This is important for no one knows when one will need the other.
How to Boot Business Credit Score
- Paying bills and loans timely – paying all the loans and bills as required is one of the best ways to keep a healthy score. Both the lenders and the companies that manage bills keep a history of your activities and will forward this to the credit bureau.
- Healthy trade lines with suppliers – as a business, trade lines with suppliers are important. So, take time to get the best vendors. Some credit bureaus need up to four trade lines to start keeping the business history.
How to Boost Personal Credit Score
- Pay loans and bills – just like in the case of business credit score, you need to clear personal credit on time. They include the monthly bills, loans repayment and credit score balances.
- Manage the credit cards – running more than one card is a big plus in keeping the score high if they are managed well. All should have a high balance at the end of the month.
Importance of Monitoring Credit Score Reports
Both the personal and business credit score reports should be monitored closely. Apart from the annual report that is sent to you, scrutinizing it any other time that you feel necessary is crucial. It is only through this that you can file a complaint against any discrepancy.
With all the above insights, it is good enough to say that you know about personal and credit scores. As mentioned earlier, they both need to be maintained at a healthy level.