When it comes to commercial mortgages, many business owners wonder whether their personal credit score plays a significant role in the loan approval process. While commercial mortgages differ from personal mortgages in several aspects, your credit score can matter when applying for a commercial mortgage, though it will depend on the type of finance you are seeking, and your specific circumstances.
Lenders use credit scores as one of the factors to assess your credit worthiness. A higher credit score typically indicates a lower credit risk, demonstrating your ability to manage debt responsibly. Lenders want assurance that you are likely to repay the loan on time, and a good credit score strengthens your case. It gives lenders confidence in your financial stability and increases your chances of securing a loan on favourable terms. Your credit score can therefore influence the interest rates and loan terms you are offered for a commercial mortgage.
While personal credit scores are commonly evaluated for commercial mortgages, it’s important to note that lenders also consider the business’s creditworthiness. For established businesses, the lender may review the company’s credit history, bank statements, accounts and cash flow in addition to personal credit scores. So, depending on the deal in question, this may have less weight.
Finally, lenders will also look at the reasons behind the low score. Whilst they wont pay too much attention to one late utility bill, multiple missed mortgage payments are likely to have an impact on the number of lenders that might provide finance.
