When lenders are reviewing your application for finance, they will take into account your credit score. There are 2 types of credit scores, a personal credit score and a business credit score. They are both different and both help to determine whether you get approved for finance or not. if you are trying access business finance, lenders can take into account your business credit score as well as your personal credit score so it’s a good idea to keep on top of both scores.
What is the difference between the two?
- Personal Credit Score:
Your personal credit score is a numerical score based on a person’s credit file. Your credit file is made up of information collected by credit reporting agencies from credit providers, courts and other organisations. A personal credit file is to represents your personal ability to pay back a debt and is taken into account when applying for finance options like a personal loan, car loan or personal credit card.
- Business Credit Score:
Business credit scores are based on business credit and financial activity and measures the business’s ability to meet its own financial duties. Business credit scores are used by banks and lenders when assessing business finance application. This business credit score will determine whether you get approved for business finance and also the interest rate given.
Related Article: Understanding Your Credit File
What determines your credit score:
A personal and business credit score will range from 0–1200 and is categorised into below average, average, good, very good and excellent. The higher your credit score the more likely you are to be approved for the higher loan amount and receive a lower interest rate. Things that can impact your personal and business credit score include credit enquiries, payment history, defaults and judgements. Your business credit score will also take into account the size of your business, industry and trading history.
Research in 2018 found that the average business credit score in Australia was 769 and 80% of businesses fall into the good or above category.
Having a strong credit score:
Having a strong business and personal credit score will boost your chances of securing loans and finance with low-interest rates. Having a high business credit score can also help secure contracts with large companies or the government as well as helping suppliers determine how much credit they can extend to you and payment terms.
It’s a good idea to keep track of your credit score to make sure the information on there is correct and make sure no fraud has taken place. This will give you the best likelihood of getting approved for personal or business finance.
You may also like to read: Easy ways to improve your credit rating
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