Most of the business owners know that their credit score has a say in whether or not their business gets a loan. But an essential thing which most of them don’t know is that it goes the other way round as well. Yes, this is true the other way round as well. This is a thing that most of the business owners don’t care about but they should. When you apply for a business loan, it is your credit score that takes a hit as well. It can hurt your chances of qualifying for a business loan and getting the best interest rates for the loan. When applying for a business loan, entrepreneurs must also be concerned about their personal credit score. Most business loans require personal guarantee directly influencing the personal credit score of a business owner. He has to suffer the consequences of taking a loan for his business. Your credit score will drop because of this. Depending on different rankings, different effects may take place. According to some of the rankings parameters, one or two loan inquiry may not change your credit score but some drop five to ten points for one. This means one or two loans may have a negligible impact on your credit score but going beyond that can be a problem. It has also been reported that a loan inquiry may affect your credit score but having a loan can help your credit score. This includes both business and personal scores.
The main thing is whether you are personally liable for the loan or not. If you are not personally liable for the loan and other debts of the business, the creditors can only seek a settlement through business bank accounts or through forced sale of business assets. If you are personally liable, you could stand to lose your personal assets if the money isn’t enough to repay the creditors.
If there is money left to pay the business loan for which you are personally liable, you’ll want to either pay it in full or try to negotiate it with the creditor, for any default will lead that to be written down on the credit report. There is particularly no law for that but if you use personal cards for getting a business loan, it is going to affect your personal credit score for sure. This means that even if you are paying the debts on time, the business debt you are carrying may result in lower personal credit score for you. One thing to remember is having lots of debts including business debts in relation to your income can also affect your personal credit score negatively even if you make repayments on time. It is important to understand the legal obligations before entering into any kind of contract or contract that can affect your personal credit score. Many business owners don’t pay too much of attention to it. It is, thus, important to understand how your business and personal interests may be affected. Your personal credit and credit score can affect your lifestyle in no time. It can be a deciding factor for stuff like owning a property for an instance.