The relationship between personal and business credit reports

Dear Experian,

You have recently responded to a question for those that short-sell their homes without being late on their mortgage payments. Under the same line, what effect does it have doing a short-sale for those people that plan to set up a business in the future?



Dear OGC,

If you went through a short sale, which means you settled your mortgage debt for less than you owed, there was likely a serious negative impact on your personal credit. That could affect your ability to secure credit for your small business.

While your personal credit report and your business’s credit report are not combined in any way, a lender could review both if you are securing business debt with personal credit. Experian has done a study of the relationship between small business owners’ personal credit and the credit performance of their small business and found the two to be very closely related.

If a small business owner is having problems paying personal debt, there is a strong likelihood their business will also have credit problems soon. For that reason, lenders may consider your personal credit history when reviewing an application for your small business.

Experian has produced a brief virtual seminar that discusses the study it conducted and why managing personal credit well is critical for small business owners.

Thanks for asking.

- The “Ask Experian” team

Our policies for Ask Experian:

The information contained in Ask Experian is for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding your particular situation. Please understand that Experian policies change over time. Posts reflect Experian policy at the time of writing. While maintained for your information, archived posts may not reflect current Experian policy. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team will include it in a future post.