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Small business credit cards will show up on a personal credit report if the card issuer reports activity to the consumer credit bureaus.
Some business credit card issuers only disclose business card activity to commercial credit bureaus (which produce business credit scores) or only report certain information to the consumer credit bureaus. That helps keep personal and business credit separate.
It's hard to avoid some crossover between your business and personal credit histories. But understanding how running a small business impacts your own finances can help you protect, and even improve, both types of credit. Here's how.
How Can Business Credit Cards Affect My Personal Credit?
There are some instances when a business credit card will almost certainly affect your individual credit, and others when it depends on the company that has issued you the card.
Business credit cards could affect your credit when:
- You apply for a business credit card. Issuers will check your personal credit when deciding whether to approve you for a business credit card. That will result in a hard inquiry on your credit report, which could have a brief negative effect on your credit score. It's more troubling to lenders if you have multiple hard inquiries on your credit report in a short time frame (except in cases when you're shopping for the best rate on a single loan type, such as an auto loan). Choose the business credit card you apply for carefully so you have the best shot at getting approved the first time around.
- The issuer reports business card activity to consumer credit bureaus. Any debt you incur on the card, and the payments you make toward it, may appear on your individual credit report if the credit card company you choose sends that information to the three consumer credit bureaus: Equifax, Experian and TransUnion. If your business credit card behavior makes its way to your personal credit report, it will affect your credit score in the same way as other credit cards do. On-time payment history and a low credit card balance will help your credit. Any missed payments will negatively impact your score; so will a high credit utilization rate, or the amount of available credit you're using.
Several issuers don't report business credit card activity to consumer credit agencies, though, and others only report negative information, such as when you pay late. Ask the company you're interested in working with about its policy before applying for a card.
- Your company falls behind on payments. To get a business credit card, you'll likely be required to make a personal guarantee, which means you're on the hook to pay for the charges on the card if the business can't. If at that point you aren't able to pay the bills yourself, missed payments will appear on your credit report, and you could be sued for the debt. When applying for a business credit card, read the terms and conditions and look for language that says you could be responsible for the debt, even if you leave the company.
Can a Business Credit Card Improve My Credit?
Just as negative information on a personal credit report can lower your credit score, positive information can bolster it:
- If your business credit card behavior shows up on your personal report, making payments on time—which accounts for 35% of your FICO score—can contribute to a strong score.
- Your card's credit limit will add to your total available credit. If you pay off business expenses along with any personal purchases each month, you'll have an even lower credit utilization rate than before.
- Length of credit history is also a factor in your credit score. If your company no longer uses a particular business credit card, consider keeping it open so your average age of accounts stays as high as possible.
When you establish business credit, you'll also begin building a business credit score separate from your personal credit score. It's a number from zero to 100 that reflects how much debt a business carries and whether it repays debts on time, similar to an individual's FICO or VantageScore. Your business credit card activity will contribute to your business credit score, and you can also ask vendors to report positive payment history to commercial credit bureaus to improve it.
The Bottom Line
Business and personal credit often overlap. But you can search out ways to limit your business's effect on your personal credit, including by applying for business credit cards only through issuers that don't report business card activity to the three main credit bureaus.
It's always crucial to keep a close eye on your credit report to make sure there aren't any errors, which could needlessly damage your score. Once you start a business, that's even more important: Financial institutions will likely check your personal credit when deciding whether to extend business credit to you, especially when your venture is new.
Regularly check your credit report so that you can get resolve any inaccuracies you find—and strengthen your personal credit score before it needs to go to work for you.