Does personal credit history affect your chances of getting a business loan?

As a business owner, access to finance at a fair rate can be the difference between your firm succeeding or failing - without financing, you might not even be able to get your business off the ground. So, what if you’ve got bad credit personally? Despite your business being a separate entity to you it is run by you, therefore a poor credit history may impact your chances of securing a loan. This is the same if you are a sole trader or the owner of a limited company looking for commercial finance. 

What are credit scores and why do they matter?

A credit score is essentially a number that signals your creditworthiness to lenders. The higher your credit score, the less risky you are. Credit Reference Agencies decide your credit score. A credit reference agency (CRA) is an independent organisation that collects and stores financial data about you for the purpose of helping lenders decide whether you should be approved for financial products like credit cards, loans or mortgages. Each CRA has its own numerical scale that they use to assign you a credit score, which signals to lending institutions how financially responsible you are.  

Your credit score determines if you get approved for:

• Credit cards

• Unsecured personal loans

• Home mortgages

• Auto financing

• Gas & electricity accounts

• Mobile phone contracts

• Flat rentals

What Credit Reference Agencies are there in the UK? 

The UK has three main credit reference agencies: Experian, Equifax, and TransUnion. Each of the big three CRAs collect and hold information on you, but there are inherent differences between the three that you should know about. It’s true that everyone in the UK essentially has three different credit scores because the three companies do not use the same credit scoring system.

Article source: https://article-realm.com/article/Finance/11319-Does-personal-credit-history-affect-your-chances-of-getting-a-business-loan.html