Does Business Loan Affect Personal Credit?
Most people know that their personal credit can affect their business loan. However, not a lot of them recognize that the same thing can also happen in reverse. That is, when you apply for business loan your credit loan can also take a hit. When that happens, your chances of qualifying and getting the best rates for your loan can all go wrong.
There are different factors which can explain the way personal credit can be influenced by business loan. These are as follows:
How Can Business Loans Have Impact on Your Personal Credit?
The impact of business loans to your personal credit strongly depends on the lender, whether they choose to have a hard credit pull or a soft credit pull, so it says. What happens when either of the two is chosen? With hard credit pull, your credit score can be lowered to about 1 to 5 points while soft credit pull apparently does no dent in your personal credit. This being the case, it is important to learn of ways to minimize the effect.
When Does Business Loans Hurt Your Personal Credit?
Your personal credit can be hurt by business loans when your full credit history is checked by the lender. Usually, whenever you apply for a business loan or simply get a quote, lenders would mostly just do a soft pull on your personal credit so it does not hurt your credit score. When the loan has been pre-approved, however, a hard credit pull is done in order for you to move on with the loan process. With that being the case, you can have as much 5 points dent in your credit score that can affect your qualifications.
How Much Can the Impact Be in Your Credit Score?
How much it will hurt your credit score depends on your credit health at the time of the check, the type of loan you are applying and the size of the loan. The impact of the hard credit pull wears off from your credit score in about a year. However, the inquiries usually stay visible in your credit for up to 2 years. Fortunately, you can find there are ways that you can reduce the effect of hard credit pull in your credit score when you look online.