Business Vs. Consumer Credit Reports: Similarities & Differences

Understanding the difference between a consumer and business credit report can be tricky, especially when owning a small business. Everything is running on a small level and has a higher chance of getting interchanged. 

However, some ingenious business owners are integrating personal and business credit into their company’s finances to stay smart and risk-free. Still, you must avoid linking two to keep your personal assets safe. 

Whether you choose to have a separate business credit card to deal with your company’s account or prefer using a secured credit card in Canada for your personal or professional) credit, understanding the differences and similarities between consumer and business reports is essential.

We’ll discuss both in detail below:

Business Vs. Consumer Credit Report

Consumer and corporate credit reports serve the same purpose: to tell proposed lenders about a client’s creditworthiness. Moreover, the reports allow them to assess their risk by extending “buy now, pay later” arrangements to you or your firm. However, they differ in terms of the types of data they hold and how they are used.

• Many small business entrepreneurs rely on personal credit to get by.
• However, if your company gets into difficulties, this might put you in danger.
• Furthermore, because personal credit is not regarded as a perfect predictor of corporate conduct, many creditors are shifting away from relying only on it when assessing a company’s financial health.

Your Social Security number is associated with your personal credit. Likewise, your Employer Identification Number (EIN) or Tax ID Number, which the government uses to identify your company for business tax deductions and other purposes, is linked to your business credit history.

It might be quite beneficial to understand the differences and similarities between consumer and corporate credit reports. After all, it’s in your best interest to keep your credit clean and acquire high credit ratings, both personally and for the sake of your company’s health. Let’s understand them a bit better in the below 

sections:

Personal Credit Report: An Overview

A credit report is a document that contains details on your credit history and current financial circumstances, such as loan repayment history and credit account status. The majority of people have multiple credit reports. A credit report’s information is used to calculate their credit score, which is significant when applying for various loans or credit cards.

A credit report may appear to be a mess of data at first glance, but it becomes much easier to read if you understand what you’re looking at.  A consumer credit report is divided into the following sections:

• Personal Data: Your credit history is directly linked to your SNN. Your credit report will include this and other information like: name (full name including maiden name and all the past names, if any), date of birth, current/previous addresses, employment record, etc.
• Credit Account Information: It can be the largest section on your credit report depending on your credit use. This includes your current and previous account data, creditor information, payment and repayment history, current account balance, credit limit, etc.
• Collection Points: When a debt is not paid, it may be turned over to a collection agency. When a debt is sent to collectors, it can appear on your credit record. According to myFico, the collection items on your credit report can hurt your score as they’re listed as negative on your report. 
• Public Record: This part of the consumer credit report can be accessible to others depending on the situation. For instance, if a lender sues you for unpaid debt and wins the case in court, it will leave a negative mark on your credit report and credit score. 
• Soft/Hard Inquiries: Anytime you apply for new credit or loan, the creditor or lender will pull an inquiry on your credit score, which appears on your credit report as a hard inquiry. 

However, some inquiries do not include a credit report check, such as when you check your own report or score, which is an exception to the norm. In conclusion, a consumer credit report is a declaration that shows an individual’s credit activity and recent credit profile.

So, what information is not included in the consumer credit report?

Your personal purchasing patterns, marital status, medical record, bank or investment balances, education record, criminal histories, and credit score are all examples of data not included on your credit report.

Now let’s find out what a business or corporate credit report looks like:

Business Credit Report: An Overview

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Businesses must be more diligent than consumers in establishing their own credit records to acquire credit apart from the business owner’s personal credit. The business credit bureaus can track trade credit, and other transactions once an incorporated or LLC entity obtains a federal TIN (tax identification number).

Banks, brokers, lenders, mortgage suppliers, and credit grantors all use business credit reports to analyze the creditworthiness of small enterprises. A credit report’s contents give vital information for making informed credit decisions.

What’s Included In A Business Credit Report?

Based on payment records and public data, a business credit report depicts the capability of a company to meet contractual obligations. The information contained in a small business credit report is critical to obtaining the finance required to run and expand a firm. A business credit report is divided into the following sections:

• Payment History: Your business’s capacity to pay its debt is a big factor inside your business credit report, just as your personal credit payment history is a major part of your personal credit score. Payment history on your credit report could be divided into trade payment histories, such as payments to suppliers, and commercial finance payment histories, such as payments on business loans, equipment leases, or insurance.
• Public Data: Your company credit report will include past or recent lawsuits, bankruptcies, or court orders. This is used to evaluate your company’s financial health as well as its liquidity.
• Outstanding Debt: According to Strategic CFO, outstanding debt is vital for a company to acquire excessive cash flow. In simple terms, any debt payment that has yet to be paid will show as an outstanding debt on your business credit report. It might also include all the short-term or long-term debt of a company.
• Business Information: It is more like your company’s profile on the credit report. The business name, official number, and current address of your firm will appear on your credit report. Other information could include your industry’s SIC or NAICS codes, your business’s form, parent companies, subsidiaries, annual revenues, etc.
• Risk Score: The Company Risk Score Report helps businesses track and measure their risk exposure at the organizational, area, and user levels. The research looks at the different elements that determine a company’s risk score, such as recent malware outbreaks, unsafe user behavior, and other suspicious factors.

You might have to pay a fee to access your business credit report, but it’s worth it when looking at the benefits it can get for your company’s finances. Each company credit reporting agency provides several alternatives for obtaining your credit report as well as monitoring your business credit scores over time.

Business & Consumer Credit Report: Similarities 

As a business owner, you’re certainly aware of personal credit, which refers to your ability to borrow money or obtain products and services based on your debt repayment history. And you’re surely aware that having good credit, or being “creditworthy,” makes it easier to obtain additional credit when necessary.

But isn’t it similar to a business credit too? Your business credit report includes similar aspects from the corporate point of view. So, what are the similarities? Here you go:

• Commercial credit reporting is similar to consumer or personal credit reporting in several ways.
• Data collectors offer credit bureaus similar information about on-time, missed, and late payments, as well as the amount of available credit.
• The information is subsequently used to create credit reports and build credit scores.
• Furthermore, business and consumer data providers must translate their information into a specific format.
• Data providers must also complete an initial application and provide various business details to get qualified to report.

The similarities, however, end there. A consumer credit report is somewhat simplified as compared to a business credit report. And, it’s only fair as a business report has to include multiple other factors that can make your company creditworthy, trustworthy and a possible place to invest in for lenders. 

Business & Consumer Credit Report: Differences

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Credit reports for businesses can also be very important management tools. Each business credit bureau provides premium reporting services that give in-depth analysis for credit risk management and business planning. The types of information displayed on a corporate credit report and the information listed on your personal credit report have a lot in common. Yet, they can’t be considered ‘similar.’

In simple words, the information in commercial credit reports and personal credit reports is not identical. Let’s read the differences in detail:

• The Reporting Bureaus: The credit reporting agencies for consumer credit reports are not the same as the business reporting firms. However, Equifax and Experian allow the reporting of both. Still, when it comes to a business credit report, you can find more than 30 agencies (popular and not-so-popular) that offer reporting services.
• Scoring Factors: Personal and business credit scores are calculated per different yet similar factors. For instance, a personal score is calculated based on the consumer payment history, debt amount, new credit line, credit mix, and an average length of consumer credit history. A business credit score is based on debt utilization, business account history, risk score, and the number of employees or company size.
• Reports Access: A consumer credit report is private information of the client that a third party can only access in case of fraud or bankruptcy. A business credit report is public information that is accessible to anyone. 

Business owners must create distinct credit profiles for their organizations. Lenders rely on the business owner’s personal credit profile to determine credit risk. Moreover, a business’s ability to borrow finance might become limited without a company credit profile.

Business & Personal Credit: A Mix?

Your personal and business credit can sometimes interact, especially if you’re a lone operator. Your personal credit will almost always have a greater impact on your business than the other way around. Because your personal and commercial credit ratings are often intertwined in small firms, it’s prudent to protect both.

It will be easier to keep the two separate if you can avoid disclosing your Social Security number (not to give access to your consumer credit history) for business purposes. Credit bureaus do not differentiate between business and personal queries, and having too many can hurt your credit score.

Business & Consumer Credit Report: The Odds?

Credit bureaus aren’t flawless, and inaccurate information—for example, fraudulent hard inquiries or charge offs—can appear on any report (business and personal).

A personal credit report has more protection than a business credit report. You can challenge any inaccurate or false information on your personal credit report. In fact, the issuer is required by law to respond. Challenges to your business credit report are not required to be responded to by the issuer. That means you’ll need to be extra vigilant in checking your business credit record for problems.

Final Thoughts

Credit reports may appear complex, but they may be an important tool for boosting your credit score. Negative things, such as late payments and collections, can remain on your credit report for at least seven years, while bankruptcies can stay on for up to ten years. Regularly checking your credit report will help you create a solid credit history, which can help you get additional loans or lines of credit in the future for your business or personal life.