A Guide to Personal Credit Score vs Business Score in Canada

_{By Marble Team, Revised by Bromwich+Smith Staff | 1326 words | Reading Time: 6 minutes and 37 seconds | Last update: 2024/0318}

The average credit score in Canada is around 753, but this is only counting personal credit scores. Many people don't know that there is also a business credit score that you will need to take into account if you want your business to be in good shape. But what is the difference between a personal credit score and a business credit score?

What factors influence these credit scores and what are their ranges? If you're looking for credit score advice, keep reading and learn more about these different credit scores below and why it is important to keep them in good shape. 

What You Need to Know About Personal Credit Scores in Canada

What is a credit score?

The first thing you should know about personal credit scores is that they range from 300 to 900. 900 is a perfect score and is considered excellent. On the other hand, 300 is the lowest score you can get, and it is considered a poor score. 

Having a very low personal credit score can damage your financial freedom in many ways. For example, if you have a poor or even fair credit score, it will be difficult for you to open bank accounts, get new credit cards, get loans or mortgages, and so on. A bad credit score can also make it difficult for you to get a new apartment, a new car, and more. 

As you can imagine, having a low personal credit score can make your life quite difficult. On the other hand, if you have a good, very good, or excellent credit score, you will be free to do all sorts of things without any problems. For example, you should be able to get a loan for very expensive cards, you could get approved for luxury credit cards, and you may get huge loans to open a business. 

The Details

As you can see, there is a big difference in what you can and can't do depending on your personal credit score. Several factors affect this score. In particular, your debt payment history has a lot to do with it. If you are always late when paying off what you owe on your credit card, your rent, or anything else, these late payments will cause your credit score to decrease. 

If you are always late when making payments, then your credit score will likely deteriorate. On the other hand, if you always pay off payments on time, then your credit score should be in great shape. Besides that, the amount of available credit you use is important as well. 

Preferably, you should use less than 30% of your available credit. This shows that you are responsible and know how to handle your money. Using less than 10% is even better and can help your credit score skyrocket. 

But how exactly does a personal credit score compare with a business credit score?

What You Need to Know About Business Credit Scores

Not many people know that business credit scores exist. After all, not everyone owns a business, and those that don't have a business wouldn't have any need to worry about this score. But if you do have a business, then you'll certainly need to take this score into consideration. 

Unlike your personal credit score, your business credit score only ranges from 0 to 100. Even though the range is different, a business credit score works much in the same way as your personal score. However, instead of being graded based on your personal financial decisions, it is instead influenced by decisions that you make with your business. 

For that reason, the things that affect your personal credit score will not affect your business credit score. Having a good business credit score is important for making certain financial decisions for your business. For example, suppose you want to take out a loan from the bank to help grow your business. 

You will only be allowed to do this if your business credit score is already in good shape. If you have a very bad business credit score, you won't be able to get any business loans, business credit cards, bank accounts, or anything else. Of course, it can be difficult to grow your business if your credit score is not great. 

How to Raise Your Business Credit Score

As with your personal credit score, payment history has a lot to do with your business credit score. For example, if you often take out business loans and never pay them on time, this will destroy your business credit score. It will also make you look financially unreliable, and lenders won't want to give you loans again. 

Credit utilization is also very important. Again, you should try to use less than 30% of your credit and, ideally, less than 10%. You should also avoid things such as bankruptcy or debt collection. These things can stay on your business credit report for six or seven years, and they can seriously damage both your business and personal credit scores. 

As long as you have a good credit score for your business, your business should have plenty of financial freedom. 

Your Personal vs Business Credit Score

Both your personal credit score and your business credit score are very important for your financial freedom. Your personal score will allow you to open new credit cards, move into new apartments, open bank accounts, get personal loans, and so on.

Your business credit score will allow you to take out business loans, open business bank accounts, lines of credit, etc. As long as both of these credit scores are doing well, you should be able to do whatever you want regarding your finances.

To learn more about how to manage your credit score, click here.

Can I obtain a credit report for someone else? 

Many credit reporting agencies including Equifax which offers a monthly payment plan and TransUnion who requires the user to sign up for an account to access their service. Some other online sites will ask the user specific questions to confirm their identity. If you are a landlord looking to obtain a credit check for a potential tenant, there are alternative options including tenant verification services. Landlords are required to pay a onetime setup fee to access a pay as you go service going forward. These landlords would need to request consent from their perspective tenants to obtain a credit history check. Accessing someone else's credit report without their permission is illegal in Canada as it is a violation of privacy laws. Regardless of why you are looking to obtain a credit report for someone who is not yourself consent from that individual must be the priority. 

Can I check my own credit history? 

We strongly suggest reviewing your own credit history at least once a year as it allows you to stay on top of potential identity theft or errors in your credit score. Either of these issues may hinder your ability to obtain best rates and terms of credit. You can access your credit report through TransUnion and Equifax at no charge, and address any inaccuracies or discrepancies directly to the credit reporting agency. Make sure to enter the same information as they have on file, and if the information does not match, you will need to call them. Equifax can be reached at 1-800-465-7166, and TransUnion at 1-800-663-9980. While it may take some time and effort, it is vital to ensuring accuracy in your credit history. 

Remember that while your credit score is an important number when applying for credit, it is not the only indicator of your financial well-being. Focus on maintaining overall financial health by practicing good saving habits, budgeting, and responsible use of credit. To improve your overall credit score there are steps that you can take today, including staying up to date on all your payments, keeping your credit card balances low, paying off debt, avoiding new credit applications, and regularly checking your credit report.  

If you do find yourself struggling with your credit score, and dealing with overwhelming debt, reach out to a trusted Licensed Insolvency Trustee for advice on what  debt relief options are available to you.