The Importance of Personal Credit in the Commercial Lending Process

Large Fortune 500 companies borrow commercially on the strength of their financial statements.  If they default on a loan commitment, typically no one is liable personally.  Only the company assets are affected.  For everyone else, including small and medium size businesses, lenders require personal guarantees of the principal owners.  This puts their personal assets at risk in the event of a default by the business.

When applying for credit, commercial lenders look very closely at the personal credit scores of the company owners, or guarantors, to a lender.  The quality of your personal credit carries a lot of weight in a lenders decision to lend to you on a commercial basis.  The theory is that if you can’t manage your personal and household finances, you probably won’t manage your business finances well either.

Keeping your credit in good standing should be a lifelong goal.  Many college students do not grasp the consequences of their spending habits when it comes to credit.  Even a small charge account that goes unpaid may come back to haunt you later on.  Even more important is the handling of student loans.  If you default on a student loan, you are automatically disqualified for life from using government loan programs, like the ones available through the Small Business Administration (SBA).  Even as a student, it is important to pay attention to your credit.  Especially if you have the entrepreneurial spirit!

There are numerous companies now who specialize in monitoring, repairing and protecting your credit and identity.  In today’s age of security breeches and identity theft, it is more important than ever to monitor and manage your credit history.  The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting agencies, Experian, Equifax and TransUnion, to provide individual consumers with a free credit report annually.

For a copy of your report go to

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