Money Goals

Do business loans affect your personal credit score?

Jan 4, 2024

If you’re a budding entrepreneur or small business owner you might be wondering how business loans, associations, and credit cards affect personal credit scores. Or, if you’re dreaming up a new business venture, you  might be asking, “does your personal credit score affect a business loan?” Loqbox asks do business loans affect personal credit? Let’s get into it.

What are business loans?

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. That could include loans to buy equipment or stock, business credit cards for day-to-day expenses, or mortgages for your premises. But who’s responsible for these lines of credit?

Do business loans affect personal credit?

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 or other credit facility. 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 credit, 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 credit report. This means that if your business has a good credit 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 credit report 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’s credit report, your personal credit 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 score into account when checking the creditworthiness of your business. A higher personal credit score 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 credit 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 credit score and vice versa. If they have a poor credit history, it can potentially have a negative impact on your ability to secure credit.

Do business credit cards affect personal credit?

So, does my business credit card affect my credit 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 credit card might be reflected on their personal credit report. But limited company credit card activity usually stays separate.

Does a company credit card affect your credit score positively?

So, if you’re a sole trader, you might be wondering, will a company credit card affect my credit score in a good way? The good news is, when used responsibly, your company credit card can have a positive impact on your credit score, just like any personal credit card you own. Using credit (responsibly) can be a great way to build credit.

If the company credit card isn’t linked to your personal credit, for example with a limited company, its activity — good or bad — typically 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.

Does my personal credit score affect my business credit?

Your personal credit score can influence your business credit, particularly in the case of sole traders and partnerships. In the case of a limited company business, lenders might review your personal credit history if the company’s own credit history is limited.  That makes maintaining a healthy personal credit score really important for business owners.

You can check your credit score with each of the three main credit reference agencies (CRAs) in the UK (Experian, Equifax, and TransUnion) using these recommended services:

ClearScore (uses Equifax data)*

Credit Club (uses Experian data)

Intuit Credit Karma (uses TransUnion data)

*For transparency, we wanted to let you know that ClearScore pays us a small commission if you sign up using this link.

If you’re looking for a fast and effective way to build your personal credit score, why not get started with a Loqbox membership. For just £2.50 per week, you can boost your credit score by up to 300 points in the first three months. We’ll report your regular payments to the CRAs. No fees, no hard credit checks, no worries! 

Improvements to your credit score are not guaranteed.

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