Step 02 The basics
Business credit vs. personal credit.
The main difference is who it's granted to. Personal credit is yours, as a person. Business credit, also called commercial credit, belongs to your business, as an entity. Understanding this is the first step toward your company no longer depending on your personal credit history.
In one sentence
Personal credit is granted to a person for their personal needs. Business credit is granted to a business to fund its operations.
That's why they're evaluated differently: for personal credit, what matters is your financial capacity and your history as an individual; for business credit, it's the business's financial health, its payment history and its ability to meet its business obligations.
The difference, side by side
| Personal credit | Business credit | |
|---|---|---|
| Who it's granted to | You, as a person | Your business, as an entity |
| What it's used for | Car, home, education, travel and personal expenses | Inventory, equipment, operations and business projects |
| How it's identified | Your Social Security number (SSN) or your ITIN | The business's legal name, its EIN and its business address |
| Where the history is kept | Consumer credit bureaus: Equifax, Experian and TransUnion | Business credit bureaus: Dun & Bradstreet, Experian Business and Equifax Business |
| How it's measured | Scores like FICO or VantageScore, from 300 to 850 | Each bureau's own scores, like Dun & Bradstreet's PAYDEX (from 1 to 100) or Experian's Intelliscore Plus |
| What's evaluated | Your financial capacity and your payment history | The business's financial health, its payments to vendors and its business obligations |
Why it pays to keep them separate
- Organization. When the business's accounts and yours are mixed together, it's hard to know how much your business really earns and how much it owes.
- A history of its own. Vendors and lenders that work with businesses check the business profile. If your business doesn't have one, your personal credit ends up carrying all the weight.
- Less weight on you. Accounts that report only to the business's profile don't add their balances to your personal credit history. A word of caution: some business products do report to your personal credit history or ask for a personal guarantee. And some business credit cards and lines of credit only report serious delinquencies to your personal history, such as payments 90 days or more late or a debt sent to collections: the late payment hurts you, but your on-time payments don't help you. This is documented in a CFPB report from 2021. Read the terms before you sign.
- Clearer bookkeeping and taxes. With separate accounts, every expense has its place and preparing the business's taxes is simpler.
What business credit is not
- It's not personal credit repair. It doesn't erase or fix your history as a person.
- It doesn't replace your personal credit right away. At first, many business products ask for a personal guarantee or check your credit history.
- It's not instant or guaranteed. It's built over time, as your business pays and someone reports those payments. Be wary of anyone who promises you approvals, amounts or timelines.
Where to start
- Register your business as an entity, for example an LLC or a corporation.
- Get your business's EIN from the IRS.
- Open a bank account in the business's name.
- Use exactly the same business details everywhere.
- Open accounts with vendors that report your payments to the business credit bureaus.
We walk you through it step by step in how to build business credit. And if you want to understand the two numbers that identify your business, read EIN and D-U-N-S number.