Why does my personal credit score get checked when I’m applying for finance for my business?

When getting commercial finance most lenders won’t only check your business credit score but your personal credit score as well, so it’s important to know where you stand before going in for finance.

For Sole Traders and Partnerships, both your personal credit score and business credit history will be reviewed and checked by lenders before they will agree to commercial finance for your business. It’s important to remember that for partnerships, even if you have perfect credit, your partner might not and this could affect the amount that’s lent to you and whether you qualify for lending.

As for Limited Companies, the business will have its own credit score which will be checked, however lenders are likely to check the personal credit scores of the directors too. The reason for this is that it represents the risk you might have for not paying the agreement back or to the financial security of the business. Again, this could affect the amount lent to you.

Most people don’t know what their personal credit score is. If you don’t check it, you won’t know what’s happening. Say you’ve bought a house and have a mortgage, everything has gone through fine so your credit score must be great? Now say you have a phone contact as well and you miss a payment one month. It’s just one payment so it will be fine right? Wrong. This one missed payment could affect your credit score and if you’ve not checked your credit report you won’t know what position you’re in when you come to get finance again. 

That is why we ask you to check your credit report before applying for commercial finance, so that you know where you stand. Going into this process with a clear understanding of your finances can help you to know what you are going to come out with.

What’s the difference between my personal credit score and business credit score?

Your business credit score checks your businesses financial history, this includes any finance applications you’ve had, your loan repayments and the supplier payment terms. This gives the lender a good idea of the financial position of the business. Businesses with a good credit score will find it easier to get commercial finance, however there are still ways for businesses with lower credit scores to gain finance.

Your personal credit score looks at your past financial actions. It shows the times you have had late payments, missing payments and any times you applied for a financial product. It’s good to note that a personal credit score doesn’t show how much you earn or any savings that you have.

How to check your credit score

At ABL we believe that it’s important to understand your financial situation when applying for commercial finance, check your credit score for free here using Credit Karma.  

Credit Karma gives you an in-depth view of your financial situation allowing you to see payment history over the last 6 years. It also provided you with a list of all your credit accounts such as bank accounts, credit cards, loans etc.

Check your credit score for free, simply enter your information and find out what your score is here.

If you’re looking for commercial finance get in touch with ABL Business today on 01274 965356 or alternatively email us on info@abl-business.co.uk. If you have bad credit get in touch to see what your options are.

*ABL Business Ltd is not affiliated with Noddle and does not receive any information you enter on their website.