Does business credit rely on my personal credit record? 

If you run a limited company, your individual credit score won’t impact your business finance prospects. Your company will possess its own credit history, crucial for lenders deciding to grant a loan. In contrast, as a sole trader, there’s no legal separation between you and your business. Lenders will examine your personal credit record in such cases.


Is business credit based on personal credit?

If you’re concerned that a low personal credit rating could hinder your ability to get business finance, gaining insight into how credit rating functions and lending decisions are made may be beneficial.

Lenders, including banks, evaluate different facets of your financial background – both personal and business – to assess the level of risk you represent. Your credit files, containing much of this information, are maintained and regularly updated by credit reference agencies.


Business and personal credit records

You possess distinct credit files, one for an individual consumer and another for your company. Various credit reference agencies store information, with the primary ones for consumers being Experian, Equifax, and Callcredit.

In the business realm, Dun and Bradstreet, Graydon, and CreditSafe are the main agencies. However, it’s common for each agency to have slightly different details about you or your business.


Information in your business credit file

Details in your business credit file stem from various sources, such as Companies House and the Registry Trust, which maintains records of County Court Judgments (CCJs).

If your business has previously obtained credit, your credit file will indicate if you adhered to the lending terms until the debt was settled. 

To determine your business’s creditworthiness, lenders consider different aspects of its financial history, including:

  • Repayment history from previous borrowings
  • Any outstanding County Court Judgments
  • Director information and ownership details
  • Company accounts
  • Information on secured trade credit
  • Previous finance applications and their outcomes
  • Total available credit for the company


The information in a business credit file is extensive, aiming to offer a comprehensive view of your company’s financial status and practices.


Building up your business credit rating

Securing business finance becomes challenging when a company lacks a borrowing history. Commercial lenders face uncertainty about the company’s performance and its ability to adhere to lending terms.

To enhance your borrowing prospects, how can you establish business credit? Trade credit, also known as business-to-business credit, offers a starting point. It involves short-term, modest borrowing, like purchasing office furniture or settling a monthly stationery order on agreed credit terms. By repaying the debt promptly and in full, you can cultivate a positive reputation and furnish credit reference agencies with insights into your probable future borrowing conduct.


Will a business credit card provider check your personal credit rating?

Business credit cards function similarly to personal credit cards, offering the advantage of keeping your company’s finances distinct. In some cases, limited companies extend credit cards to key staff members to enhance efficiency and manage cash flow throughout the month.

While personal credit doesn’t necessarily predict a business’s debt repayment, in the absence of an established credit rating, lenders may rely on this information. Some lenders employ scoring software that combines personal and business credit scores to assess the likelihood of repayment.

As your business grows, you’ll likely explore additional sources of finance. Timely repayments in these instances contribute to enhancing the company’s credit rating. This progress may also open doors to lower interest rates and better overall deals in the future.

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Does a business loan affect personal credit?

Similar to business credit cards, when applying for a business loan and there’s insufficient information for a lending decision, the lender may review your personal credit file. 

They may conduct a ‘soft’ or ‘hard’ credit inquiry. While a soft inquiry shouldn’t affect your credit rating, a hard inquiry, if required and the business loan is declined, could result in a decrease in your personal credit score by one to five points.

Concerned about the potential impact of a poor personal credit rating on your company’s financial prospects? Our experts at Vanguard Insolvency can offer professional assistance. We’ll guide you on the potential interconnection of the two credit ratings in your case and provide strategies to enhance your credit scores for smoother borrowing in the long run. 

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.