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Grow Your Business Finances

Business Credit Score vs. Personal Credit Score: What's the Difference?

Business vs. personal credit score
Credit: Andrey_Popov/Shutterstock

Keeping tabs on your personal credit score is a common practice. You can't spend a day on TV without seeing an ad that offers a service for monitoring your credit score or the importance of getting a detailed credit report.

Yet for those with their own company, a business credit score is just as important. The scores provided by credit monitoring agencies determine how creditworthy your business is, plus they impact the type of financing you can get for future projects. While keeping track of both a personal and business credit score may not be a thrilling prospect, it's absolutely essential as part of a sound business financial strategy.

There are three major bureaus for business credit scores: Dun & Bradstreet, Equifax, and Experian. Each uses their own methodology for determining a credit score for a business. Nerdwallet has a good breakdown of the parameters behind each of the three major business credit bureaus.

Taking ownership of your business's credit score is key. For example, if your business is relatively new or doesn't yet have one, acquiring a D-U-N-S number is an important first step. This is a nine-digit identifier that's long been used for establishing a business credit file.

For those seeking to build a business credit score, it's worth reaching out to the other agencies on their processes for updating and maintaining a rating. Unfortunately, an actual credit report will usually cost you a fee. But just like with a consumer score, you'll want to monitor it regularly so that any errors are addressed. Each credit agency offers a mechanism for reporting if information needs to be disputed or corrected.

Your personal credit score is tied to your own financial history. So your own credit usage and transactions are the primary drivers of the score. Your history with bill payments, loans, real estate transactions and other financial transactions all tie into this.

You may be familiar with the three major credit reporting bureaus: Equifax, Experian and TransUnion. You are entitled to a free report from each of the agencies once every 12 months. Such transparency into your credit (and checking your reports annually) is essential to maintaining good credit.

If you discover an error on your report, take quick action. What makes this more critical is that there isn't always a clear separation between a personal and business credit account for business owners. Sole proprietorships conduct most or nearly all their business transactions using their personal accounts.

So if you want to differentiate yourself for business, start taking small steps to do so. Set up a separate account for the business, apply for a D-U-N-S number, or consider making the full leap and incorporating or forming an LLC.

If you're a solopreneur or small business, it's going to mean more work monitoring both a business and personal credit score. However, when it's time for expansion or engaging in other important financial transactions, you'll be glad you put in the effort.

Derek Walter

Derek Walter is the founder of Walter Media, which offers writing and content strategy services. He is also the author of Learning MIT App Inventor: A Hands-On Guide to Building Your Own Android Apps. Follow him on TwitterFacebookLinkedIn or Google+.