Could a Poor Personal Credit Score Affect Your Business?


Could a poor personal credit score affect your business’s ability to access funding at a competitive rate? Your questions answered.

Personal and commercial finance providers use your credit record to assess the level of risk you present before they make a lending decision. If your personal credit score is low, you could be refused an overdraft, personal loan, credit card or mortgage. Similarly, if your business has a poor credit score, it could be turned down for commercial lines of credit as loans and hire purchase agreements.

But could a poor personal credit score affect your business’s ability to access funding at a competitive rate? Let’s take a look.

H2: How are lending decisions made?

Before we discuss whether a poor personal credit rating could prevent you from securing business finance, it pays to understand how the decision to lend is reached. If you apply for commercial finance for your business, banks and other lenders will typically look at all the information available to them, both business and personal, to make their decision. This will give them the clearest picture of the level of risk you pose.

On your personal credit file, they will find details of the regular payments you make for credit cards, utilities, mobile phone contracts, mortgages and even personal loans from companies such as Wonga. If there are adverse events, such as missed payments and defaults recorded on your personal file, that will help to build the picture about the level of risk you present. 

However, while this information is important, a commercial lender will also take into account a diverse range of information about your business when making their decision. That is likely to include:

  • Your repayment history
  • Details of business ownership and information about other businesses you have owned
  • Company accounts
  • The number of previous applications for finance and whether they were successful
  • The amount of credit available to the company

H2: Do lenders offer finance to business owners with a low credit score?

If you have a low credit score then it should not prevent you from securing finance for your business; however, you may find that there are lower limits on the amount you can borrow and the interest rate is higher. If you are struggling to secure a business loan with a poor personal credit record, you could consider approaching a specialist bad credit lender. They will look at other factors such as the business’s current performance when making a decision and may ask for security to reduce the risk.

If you do approach a bad credit business lender, you should always calculate the total cost of borrowing and explore your alternative finance options before entering into an agreement.

H2: How can you improve your business’s credit record?

If you’re struggling to obtain affordable commercial finance due to your business’s poor credit score, there are steps you can take to improve it. Using trade credit, when your suppliers agree to provide you with goods in return for payment at a later date, can be a good place to start. Accessing short-term, low-level borrowing such as finance agreements for the office furniture or business vehicles can also be beneficial. If you repay the debt in full and on time, this will be reflected in your business’s credit score and the credit reference agencies will start to build a more positive impression of your borrowing behaviour.  

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