Although similar on the surface, personal credit and business credit are different in many ways. Some of the differences between personal vs. business credit include:
Personal credit is based on your personal financial history and demonstrates how reliable you are with your personal finances. Your personal credit score indicates to lenders how likely you are to pay your bills on time. A good personal credit score helps you qualify for financial products such as personal credit cards, car loans, and student loans.
In comparison, business credit is directly tied to your business’s financial history. Your business credit score demonstrates whether your business is a good candidate to lend money to or do business with. Your business credit score indicates to lenders, suppliers, and other vendors how likely you are to pay your business-related invoices and bills on time. A good business credit score helps you qualify for business loans, lines of credit, and trade credit from lenders and suppliers. It can also help you secure low-rate business loans, along with more favourable repayment terms for small business loans and other financial products.
Personal credit scores range typically range between 300 and 850. This range may differ between credit bureaus. The higher your score, the lower amount of financial risk you pose for lenders. By improving your personal credit, you want to get your personal credit score as close to 850 as possible.
On the other hand, business credit scores in Canada vary between the two main credit bureaus. TransUnion’s business credit risk score ranges from 400 (poor) to 800 (excellent). Equifax provides four separate scores that each provide specific information:
Managing these different scores can be difficult for any small business owner. That’s why Thinking Capital and Equifax have teamed up to create the Small Business Grade. The Small Business Grade is a simple metric that helps you understand your business credit health. Like grades on a high school report card, your Small Business Grade appears as a letter score from A to E. The higher your letter score, the stronger your business credit health is.
Canada’s national credit reporting agencies, Equifax and TransUnion, each calculate personal credit scores in slightly different ways. Each credit bureau has multiple scoring algorithms, which is why you might see a different personal credit score reported by each bureau. In general though, the main factors that they use to calculate your personal credit score are:
In comparison, Equifax and TransUnion calculate your business credit score using a wide range of traits about your business and its financial history. Again, each credit bureau has its own scoring algorithms and calculates your score in slightly different ways. Variables used to calculate your business credit score include:
Although many of these factors are similar to those that impact your personal score, some are unique to business credit scores.
Your personal credit report, which you can access from Equifax or TransUnion, includes four main types of information:
In contrast, your business credit report is much more comprehensive and may look different depending on which credit bureau your report is from. Equifax’s business credit report includes the following details:
As you can see, your business credit report has a wealth of useful information that can be used to assess your business credit and financial health. Equifax has a sample business credit report that you can look at to see what information is available on Canadian small businesses. Their business credit report user guide provides more details on how to walk through your report.
It’s helpful to review your business credit report on an annual basis. But reviewing this report regularly can be extremely time-consuming and expensive. A quick and easy way to monitor your business credit health is to access your Small Business Grade dashboard. This free dashboard shows you the top factors that are impacting your business credit health, along with tips on how to improve it. You can also receive monthly alerts to stay updated on how your Small Business Grade and your business credit health are changing.
Your personal credit score and reports are safeguarded by consumer protection regulations. Because of this, you must authorize a credit inquiry before another party can check your personal credit score. Here’s an example: when you apply for a mortgage, your bank or mortgage broker will need your permission to access your personal credit report and check your personal credit score.
In contrast, anyone can access your business credit report, as long as they pay the necessary fees to Equifax or TransUnion. This is because consumer protection regulations don’t apply to businesses. When you apply for financing or trade credit with lenders or suppliers, they will often pull your business credit report to evaluate whether your business is creditworthy and able to repay debts on time. Because lenders and suppliers will look at your report before working with you, it’s important that you monitor your business credit score and work towards building a high business credit score.
Advice and research for Canadian small businesses from our expert team