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Using a company credit card can be a great way to keep your personal and business expenses separate—and even help you rack up some great rewards and perks.
Just keep in mind: Your company card can impact your credit. It all depends on the type of card, who's responsible for payment and how it's used. When you're the primary account holder for a small business card, how you manage that card will affect your credit. And even if you're an employee and an authorized user of a small business credit card, it can affect your credit. However, if you work for a large company and have one of its corporate cards, your credit is unlikely to be impacted.
Why Does My Small Business Card Have an Effect on My Credit Score?
When you open a small business credit card as the primary account holder, you're offering your personal guarantee of repayment. Even though you may be using the card solely for business expenses, the process is really no different from applying for a personal credit card. This means that the card issuer will check your credit history and credit score before approving your account, just like they would for a personal credit card. Likewise, your balance and payment history will likely be reported to the major consumer credit bureaus (Experian, TransUnion and Equifax).
When you make your payments on time and carry very little debt, your small business credit card can add positive information to your credit history and improve your credit scores. But if you miss payments and accumulate a large amount of debt, then your small business credit card can have a negative impact on your credit history and scores.
Even if you are just an authorized user on your employer's small business credit card, it can still have an impact on your credit score, but a less significant one. If your employer manages its small business credit card responsibly, it can actually help your credit history. But if your employer's card is managed poorly, or carries a large balance, then that can be reflected on your credit history and credit score.
Was My Credit Checked When I Got My Company Card?
Because you agree to pay back the loan from a small business credit card, the card issuer will always want to examine your personal creditworthiness before granting approval. But if you're simply becoming an employee-authorized cardholder on the owner's small business credit card, then the card issuer won't check your credit.
That changes with a corporate credit card. Your credit may be checked when you are made an authorized user on a corporate card, which is a card issued to larger companies, as well as nonprofit and government entities. This credit check can have a minor effect on your credit score, but it's temporary. To find out if you've been the subject of a credit check, also called a hard inquiry, you can check your credit report. Once you have the card, the balance and payment information will be reported on the organization's credit report and won't be a part of your credit history.
How Can I Avoid Negative Impacts to My Credit?
If you're the primary account holder on a small business credit card, then you need to manage the card responsibly, just as if it were a personal credit card. The key to responsible credit card use is always paying your bills on time and carrying very little, if any, debt month to month. It's also important to examine your statements every month to ensure that there aren't any unauthorized charges. For more information, see "What Affects Your Credit Scores?"
But if you're an employee and authorized user on your company's business credit card, you may wish to examine your credit history to ensure that the card's balance isn't adding to the debt reported on your credit history and hurting your credit scores. If so, you may want to ask your employer to remove you as an authorized user.
The Bottom Line
Whether your company card affects your credit score depends on what type of card it is. When you're the primary account holder of a small business credit card, it's essentially the same as having a personal card. And when you're an authorized user on your boss's small business credit card, the effect is comparable to being an authorized user on a personal card. But when you've been issued a corporate card, you can expect very little effect on your credit. Your credit may be checked when the card is issued to you, but the balance and payment information is reported as part of the organization's credit history, not yours.
By understanding how small business and corporate credit cards can affect your credit, you can make the right decisions to protect your credit score.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on April 17, 2019, and has been updated.