The bottom line is that there’s no law to stop information about business loans from showing up on your personal credit report. If you’re a guarantor for a business loan, chances are that info will rear its head on your personal credit report. 

If you use any personal credit cards for your business, that will also reflect on your credit score as can using your home’s equity to fund your business. So, what does this mean? For one thing – even if you’re making payments on time, the debt you’re carrying for the business may result in a lower personal credit score for you!

Keeping business debt off personal credit scores

The most obvious way of doing that is not using personal credit to fund business. To completely separate business from personal finances, the first step would be to make the business its own legal entity where you’re not liable for the debts of the business. If you’re sole owner/proprietor potential creditors will likely check both your business and personal credit history. Consulting with a lawyer will give you a better perspective.

What you could do:

  • Consider incorporating your business;
  • Research getting a business card that won’t consistently hand over your info to credit reporting companies. However, thinking you can eliminate your personal liability by getting a business credit card that says it doesn’t report to credit bureaus may be a faux pas. Protect your personal assets by not borrowing large amounts and by paying on time, all the time;
  • Ask questions. Don’t apply for a business loan without knowing the in’s and out’s of it. Read the contractual fine print. Ask the lender what the institution’s policies are about reporting on business loans and make your decision accordingly;
  • Any other options? Can you tap into other funding sources like life insurance or RRSP’s? That may be an alternative.

Separating personal and business finances is a wise decision. Never put yourself in a hard spot – where you’re over your head in debt. Speak to someone before it gets to that point.

Your personal credit affects your entire life. It can be the deciding factor in many things like owning property for instance. The professionals at Northwood Mortgage™ will steer you in the right direction when it comes to your personal finances and lending. Give them a call today to set up a no-cost consultation.