Can Business Credit Cards Affect Your Personal Credit Score?

Want to get a business credit card, but are worried that doing so may hurt your personal credit score? Then this guide is for you!

Business credit cards are often a great idea — they help separate business expenses from personal purchases and rewards are usually built with business spending in mind. Plus, they often incorporate extra benefits targeted towards business users.

However, in some cases card issuers report activity on a business credit card to one of the three major personal credit bureaus — Equifax, Experian, and TransUnion (these bureaus collect and sell data regarding the credit history of individuals, and problematic usage can impact your ability to get loans and apply for credit cards). This means that negative actions like missing payments or high credit utilization may indeed affect you personal credit.

It isn’t all gloomy, of course. By staying on top of payments and using your business credit card wisely, you should only save money in the long term. Plus, depending on the issuer, you may actually help your personal credit score.

To get the full picture on just how a business credit might be able to harm your personal credit score, read on below!

How Business Credit Cards Can Affect Personal Credit

Unfortunately for those that want to keep business credit entirely separate from personal credit, you’ll often be required to back up your business credit card with a personal guarantee. Should your credit card require this, you’ll be on the hook if your business’s account defaults. Note that in some cases, issuers won’t report your activity to personal credit bureaus while other may only report when your account is seriously delinquent.

As always, it’s helpful to monitor your credit score. That way you can track any changes and potentially stop harmful practices before things get out of hand. Don’t know your credit score? Find out with one of these free tools.

Here are a few key reasons why your personal credit score may be affected by business credit card usage:

Credit Inquiry For Your Application

When you apply for a business credit card, the issuer may look at both your business credit and your personal credit history. If this is the case, you’ll receive a hard pull on your credit.

Hard pulls will drop your credit score by a few points. However, they shouldn’t be damaging to your credit in the long term (unless you apply for numerous cards in rapid succession).

Credit Utilization

If you are using a high amount of your available credit, and your card’s issuer reports all your activity to personal credit bureaus, you may see a negative impact on your credit score. Credit utilization is based off the amount of credit you’re using and the amount of available credit you have.

In general, it’s best to only utilize up to 30% of your available credit. It’s even better if you can keep the amount below 10%. Luckily, business credit cards usually include higher credit limits than those that fall under the personal variety.

Failure To Make Payments On Time

This is the big one. Late payments make up a big part of your credit score and can stay on your history for up to seven years. Plus, some issuers will only report info to personal credit bureaus if your business credit is seriously late on payments. This means that while you may be safe utilizing a lot of credit, you will still be dinged for operating a delinquent account.

Besides potentially affecting your personal credit, a delinquent account costs you more money, too. For starters, you’ll likely need to pay a penalty APR (generally around 29.99%) and may be further subject to other late fees.

Issuers That Report Spending To Personal Credit Bureaus

Some issuers will send information to credit bureaus and others won’t. We’ve outlined how some of the major issuers handle credit report below.

These issuers will report your activity to personal credit bureaus:

• American Express (but only negative activity)
• Barclays (depends on the situation)
• Capital One
• Discover

These issuers won’t report your activity to personal credit bureaus unless your account becomes delinquent:

• Bank of America
• Chase
• US Bank

These issuers generally won’t report your activity to personal credit bureaus:

• BBVA
• Citi
• Wells Fargo

Note that all the above issuers do report activity to commercial credit bureaus, with the exception of BBVA (which does no reporting at all).

Can Employee Spending Affect Personal Credit?

Employee spending won’t directly affect your personal credit. However, if your employees spend more than you can pay off in a payment period, or their spending constantly utilizes too much of your available credit, you could see dings on your credit report. To avoid these potential problems, be sure to frequently monitor charges to your account and set up the spending tools that come with your card. For all the ins and outs of employee cards, read up on our guide.

It’s also worth mentioning that employees who are authorized users may see an effect on their own personal credit scores. If you are on top of payments and manage spending efficiently, you could help boost their credit scores. On the flip side, if you’re struggling with payments, it may be worth double-checking that employees are okay with being authorized users — otherwise, they could have their credit unknowingly damaged.

Should I Get A Business Credit Card That Won’t Affect Personal Credit?

When it comes time to choose, you should look for cards that offer rewards that best fit your business’s spending profile. However, if you anticipate that you’ll constantly be behind on payments, then you may want a card that doesn’t report to personal credit bureaus. Of course, that’s not a very savvy way to plan to get a credit card; instead, you should try to follow some of these best practices for credit cards.

One way you can ensure your personal credit won’t be affected is by applying for a corporate credit card. Because corporate card liability is placed on the business level, you’ll be able to avoid any personal guarantees. However, corporate cards are only available for larger companies; for instance, you’ll likely need to make at least $4 million in annual revenue.

Get a complete breakdown of the differences between corporate and business cards.

Maintaining Good Credit: Best Practices

The number one best thing you can do to maintain (or even build) good credit is pay off your card in full every month. By doing so, issuers won’t have a reason to report negative activity to credit bureaus. Plus, you’ll save money by not paying extra for interest or on late fees.

On top of this, you’ll want to keep your credit utilization low. This means that you should only use up to 30% of your allotted credit line — and, ideally, between 1% and 10%.

Get more tips on how you can boost your credit score with a credit card.

Final Thoughts

While business credit cards can affect your personal credit history, your score should be fine as long as you stay on top of payments and don’t utilize too much credit.

Ultimately, smart use of a business credit card can only be a good thing. By boosting your business’ credit score, you’ll be able to apply for better credit cards and lower interest loans, helping your business grow faster.