Personal and commercial credit scores are two distinct facets of an individual. But on the surface, there is just one distinction between the two scores. Your personal financial history is covered by your personal credit score, whereas the financial history of your business is covered by your business’s credit score. Your creditworthiness is determined using these scores.
Your personal and company credit scores are determined by credit bureaus using the same metrics. However, keeping both scores is crucial because personal credit is occasionally used in the case of loans for enterprises (sole proprietorship). Learn more about personal and commercial credit scores as you continue reading.
What is a personal credit score?
A credit score is a three-digit number ranging between 300 and 900 that determines your creditworthiness. Lenders use this score to figure out if you are eligible for loans. A credit score closer to 900 is considered healthy. Having a credit score below 600 is considered poor and it might hamper your chances of getting a loan. Apart from your credit score, lenders also look at your credit history to determine your loan eligibility.
Factors that impact your credit score include:
- Your previous debt vs. your income
- Your repayment behavior
- Credit utilization
- New loans you have applied for Your credit mix consists of your credit cards, all loan accounts, etc.
- If your credit score is below the required number, making all your payments on time and clearing off your dues is advised.
Also Read: Factors Other Than Salary that Determine Personal Loan Approval
What is a business credit score?
A business credit score is used to determine the creditworthiness of your business. However, the factors used to determine your business credit score differ. These factors include:
- On-time payment history
- Business vintage
- Open lines of credit
- New lines of credit
Collections over the past 7 years
- A business credit score is crucial not only for applying for loans but also for conducting your business profitably. While signing a deal, suppliers and vendors check your business credit score. If you have a good business credit score, you can negotiate better deals with your vendors.
- If you have a low business credit score, it is advised to make your payments on time, aim for a lower credit balance, and keep business debt low.
Personal Credit Score vs. Business Credit Score
Credit scores for Personal Loans and Business Loans are calculated on similar parameters. However, there are some minor differences that you need to know. Personal credit score and business credit score is calculated based on:
| Personal Credit Score | Business Credit Score |
| Debt-to-income ratio | Repayment history |
| Repayment behaviour and history | Business vintage |
| Credit utilization | Open lines of credit |
| Latest loan applications | New lines of credit |
| Credit mix | Past collections |
Minimum CIBIL score for Personal Loans and Business Loans varies from lender to lender. However, it is important to maintain a credit score within the range of 700-900 to secure loan approval.
Is a personal credit score required for Business Loan approval?
- Although personal and business credit scores are closely related, lenders will check your personal credit score while approving your Business Loan in certain cases. Your personal credit score will be considered if your business falls under the MSME category. It will also be considered if your business does not have a substantial credit history, and in cases of sole proprietorship and self-employed individuals.
- You can avail of a Personal Loan or Business Loan by maintaining a good credit score and financial hygiene. Maintaining a healthy credit score also improves your financial habits for the future. In some cases, this might also enable you to negotiate for a lower Business Loan or Personal Loan interest rate.
Summing up
- Whether it is for personal use or business, having a good credit score is crucial if you wish to avail of funds. Your personal and business credit scores determine your creditworthiness and give a snapshot of your credit hygiene to lenders. Hence, it is advised to maintain both scores diligently.
- The minimum credit score for a Personal Loan varies from lender to lender. But remember generally all lenders might approve your Personal Loan and Business Loan applications if you have a good credit history.
- At creditsuccess, you can apply for a Personal Loan or a Business Loan through our hassle-free online application. You can avail of a both Business Loan and Personal Loan at attractive interest rates. The loan is unsecured and can be used as per your requirements, without any restrictions.
- Our feature-rich Business Loans can be a perfect financial instrument for your enterprise. Use our Business Loans to hire staff, procure advanced machinery and equipment, infuse working capital, and expand your services.
