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Mythbusters: Rate Shopping Will Hurt My Credit Score

The credit score is one of the most rumor-prone areas of the financial world. Although the companies that determine credit scores used by most institutions provide hints about activities that will and will not hurt your credit, their precise formula is a closely guarded secret.

Secondly, lots of lies and misinformation swirl around the credit score and its impact on securing loans. When you add that extra layer of applying for a small business loan rather than a personal loan, it’s hard to know what on earth to believe. Let’s take a look at a few myths around credit scores that need to be put to rest.

Myth Busted: My Business Credit Score Will Get Me a Loan

While, yes, it is true that your business has its own credit score, when you’re a small business, it’s the business owner’s personal credit score that matters most. Only when your business grows will your business credit score factor into the loan process, but for now, if you are the one paying the loan back, it’s your score that will be considered. Keep in mind other factors about the business will be taken into account – such as business revenue, industry, and cash flow – that can help if your credit score is lower, but the score will remain an important deciding factor.

Myth Busted: Multiple Inquiries On My Credit Report Will Drastically Drop My Credit Score

One rampant myth is that while shopping for a loan, each time a lender checks your credit score, it will drop drastically. While it is true that “hard inquiries” (inquiries for the purpose of loaning you money) might cause your credit score to drop a few points, it’s not true that multiple credit checks for the same type of loan, at the same time, will massively lower your credit score. What happens is that the first inquiry typically lowers the score as there is no way to know that the first inquiry is anything more than a request for credit. But as additional inquiries appear, the likelihood of rate shopping creeps up, so the scores are less impacted by the subsequent inquiries, and in some cases, may not be impacted at all. However, each of the inquiries WILL show on the credit report, but future inquirers should be able to deduce that you were shopping rates.

Unfortunately, this myth can actually prevent a small business owner from shopping around for the best loan rates and options, meaning they end up paying too much in interest or fees.

It also doesn’t hurt your credit score if you yourself decide to check it multiple times. The myth that checking your own credit harms your credit score is also destructive, because it can prevent people from keeping up with their own credit reports or finding potential problem areas before they go to apply for credit. Check your credit report as often as you like! You can use a site like to check your credit for free with each of the three major credit bureaus once per year. Experts recommend pulling a credit report from one of the bureaus once every 4 months to ensure that you are seeing the big picture.

How Can I Safely Shop for a Small Business Loan?

Considering how important your personal credit score is, you certainly want to approach the search for the lowest small business loan rates carefully. The best way to keep your credit score safe is to find a resource that can consult you through the loan application process, making sure you’re positioning yourself to receive the lowest rate possible, but also keeping your personal finances safe.

Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.
Meredith Wood