Do business loans affect your personal credit score?

If you’re a budding entrepreneur or small business owner, you’ll no doubt have a lot on your plate already and so let’s jump straight into how your business loans, associations and credit cards could affect your personal credit report. 

If you’re dreaming up a new business venture, you  might also be wondering if your personal credit score affects a business loan.  Let’s get into it.

Do business loans affect personal credit?

Business loans are similar to personal loans. The main difference between them is that while personal loans are used to help your personal finances, business loans are used for commercial purposes. This means that when it comes to your credit report, it really depends on whether you are a sole trader, operate under a partnership structure, or trade as a limited company

What if I’m a sole trader or in a self-employed business partnership?

As a sole trader, you alone have responsibility for the success of your business. In a self-employed partnership, you share that responsibility with one or more business partners. In both of these cases, lenders may look at your personal credit history when checking your creditworthiness. 

Lenders do this because they need to get an understanding of how responsible you, and any business partners you might have, are with credit and finance more generally. This helps them decide how much they might be willing to lend you, over what period, and how much interest they will charge on a loan. Running a credit check can also help to confirm your identity. 

If you apply for a business loan as a sole trader, or apply for a joint loan with a business partner, missed payments or defaults on the business loan can have adverse effects on your personal report, and maybe even make it harder to get personal credit in the future.

What if my business is a limited company? 

If your business is a limited company then there is less direct connection between your personal and business credit ratings and reports. As a limited company, the business is considered, in legal terms, to be separate from you as an individual. 

In this case, lenders are more likely to look at the company's report. This means that if your business has a good history, any business loan is unlikely to show up on your personal credit report. However, if your business credit history is limited, lenders might decide they need to check your personal history as well.

This also usually applies when one or more limited companies apply for a joint business loan. If you are unsure, it is worth seeking professional advice.

Do business loans show on personal credit reports?

Again, it depends on whether you’re a sole-trader, working in a self-employed business partnership, or operating a limited company. 

If you’re a sole trader or in a partnership, your business loan activity will be attached to your (and your business partner’s) name. That means missed payments, defaults, and other negative activity can hurt your personal credit history. But, if your business is a limited company, and your loan application uses information from your business’ report, your personal history is unlikely to be affected if you apply for a business loan.

Does your personal credit score affect a business loan?

Yes, it can. Especially for small businesses and start-ups. Lenders might take your personal credit report into account when checking the creditworthiness of your business. A healthier personal history can help your business get off the ground and improve your chances of getting better loan terms and higher credit limits.

Does financial association affect credit score?

Yes, any financial associations you have on your report can impact your personal credit score. If you have joint accounts or joint mortgages with a business partner, their financial behaviour can affect your report and vice versa. If they have a poor credit history, it can potentially have a negative impact on your ability to secure a loan.

Do business credit cards affect personal credit?

So, does your business credit card affect your score? Similarly to business loans, the impact of business credit cards on personal credit depends on the type of business structure you have. A sole trader’s business card might be reflected on their personal report. But a limited company’s credit card activity usually stays separate.

Could a company credit card affect your credit score positively?

The good news for sole traders is, when used responsibly, your company card can have a positive impact on your report, just like any personal credit card you own. Using it (responsibly) can be a great way to strengthen your history.

If the company card isn’t linked to your personal report, for example with a limited company, its activity won’t affect your personal credit score. However, either way, it’s really important to always make sure you use your cards responsibly and make timely payments to maintain healthy personal and business credit.