Do business credit cards affect personal credit?
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BLUEPRINT
Published 6:14 a.m. UTC Dec. 12, 2023
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Some business credit cards could affect your personal credit reports and scores. But if you manage your accounts responsibly, it can help you establish both good personal and good business credit over time. There are potential downsides, however, such as if you max out your card’s limits or miss your payment due date.
We’ll dive into the details about when and how business credit cards could impact your personal credit. Read more about building your business credit and how to choose the best business credit card for your needs.
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Will a business credit card affect my personal credit?
A business credit card could potentially impact your personal credit in two ways:
1. Business credit cards that report to consumer credit agencies
It’s common for business credit card companies to share customer information with one or more of the business credit bureaus (e.g., Dun & Bradstreet, Experian, Equifax, etc.). But some business credit card issuers may report cardholder activity to the consumer credit bureaus as well.
If a business credit card shows up on your personal credit report with Equifax, TransUnion or Experian, the account could impact your personal credit scores just like any other personal credit obligation. Responsible management of a business credit card that appears on your personal credit report may help you establish good personal credit scores. But bad habits like late payments or high credit utilization could hurt you.
Some businesses rely on credit cards as an extra source of cash flow — like revolving a balance from month to month or taking advantage of affordable 0% APR business credit card offers. While such generous offers could certainly save your business money, it’s also important to understand the risk.
If you regularly run up a high credit balance relative to your credit limit on a business credit card and the account appears on your personal credit report, your personal credit score might decline due to high credit utilization, which accounts for 30% of your FICO Score. This could trigger negative consequences such as trouble qualifying for attractive loans, credit cards and other financing offers in the future. Lower personal credit scores might even cause you to pay higher car insurance premiums.
2. Defaulting on your business credit card
Some business credit card issuers don’t report account activity to the personal credit bureaus unless you mishandle the account. That could be disappointing if you’re hoping to build positive credit with the account. However, when a business credit card doesn’t appear on your consumer credit reports, you don’t have to worry about managing its impact on your personal credit utilization ratio.
Be aware that you’ll typically have to sign a personal guarantee when you open a business credit card. This is a promise that if your company fails to repay the money it borrows, you accept personal responsibility for the debt. If your company defaults on its debt, the unpaid balance could eventually appear on your personal credit reports (likely in the form of a collection account).
Which business credit cards report to personal credit bureaus?
Each credit card company has its own policy when it comes to credit reporting. Here is a look at some of the top business credit card issuers that may or may not report account activity to the consumer credit bureaus along with the types of activity each card issuer usually reports.
*Some Capital One business credit cards may report all account activity to the consumer credit bureaus. However, the Capital One Spark 2% Cash Plus * The information for the Capital One Spark 2% Cash Plus has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer. and the Capital One Venture X Business Card * The information for the Capital One Venture X Business Card has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer. should only show up on your personal credit report if negative account activity occurs.
How does a business credit card appear on your personal credit report?
As mentioned, only some business credit cards appear on personal credit reports. However, when a business credit card does show up on your personal credit report with Equifax, TransUnion or Experian, the way the account appears can vary based on card issuer policy.
Discover, for example, is reported to share all business credit card account activity with the consumer credit bureaus. This means that if you open a Discover business credit card, the account should appear on your personal credit report just like any other personal credit card including details such as:
- Account balance.
- Credit limit.
- Payment history.
- The date the account was opened.
With other business credit cards, like Chase cards, reports indicate that you’ll only see information about the account on your personal credit report if you fail to pay on time. In this situation, you might see a collection account appear on your credit report from a third-party debt collector if you fall behind on your business credit card bill.
Tips for building business credit
Having a good business credit score can be helpful, especially if you need to qualify for small business loans and other types of business financing in the future. Below are three simple tips to help you build your business credit profile:
Set up your business the proper way
There are several important steps to take when setting up a new business. To begin, you’ll want to register your business with your secretary of state, business bureau or business agency if your business is an LLC, partnership, corporation or nonprofit. During this process you’ll designate a business structure (e.g., corporation, LLC, etc.) and unique name. Next, you can apply for a free Employer Identification Number (EIN) from the IRS and open a separate business bank account.
Sole proprietorships typically just need an EIN, although if you want to trademark your business, product name or brand, you’ll need to file an application with the United States Patent and Trademark Office. Finally, your business may also want to apply for a Data Universal Numbering System (DUNS) number from Dun & Bradstreet, which could be handy down the road when seeking potential investors or partners.
Open business credit cards and other accounts
Once you set up your business, you’re ready to move forward with the business credit-building process. One of the easiest ways to build credit in your business’ name is to apply for a business credit card using your company’s EIN. If you open an account with a card issuer that reports to one or more of the business credit reporting agencies, your new business credit card has the potential to help you establish business credit. Other types of business tradelines may also help you accomplish this same credit-building goal, such as vendor accounts with supply companies that offer net-30 (or longer) repayment terms.
Pay on time
As you work to establish a good business credit score, paying on time is essential. In fact, paying early might help you earn a higher credit score with certain business credit scoring models like the Dun & Bradstreet (D&B) PAYDEX Score.
Choosing the best business credit card
There are many business credit cards that offer attractive benefits and rewards. If you’re trying to narrow down your choices and select the best business credit card for your situation, the following tips may help.
- Review your credit. When you apply for a business credit card, the card issuer will typically check your personal credit during the application process. (Note: This could result in a hard inquiry that might impact your credit score.) Once you know where your credit stands, you can find out which business credit card offers you might be eligible for based on your credit score.
- Compare features. Next, make a list of the offers that appeal to you most and match them to your highest spending categories. Perhaps you’re most interested in business credit cards that offer travel rewards. Or maybe you prefer cash-back business credit cards. On the other hand, you might be most attracted to business credit cards with no annual fee. There’s no right or wrong answer here, only personal preference.
It’s also common to open multiple credit cards over time to take advantage of various welcome bonuses and different spending category rewards. And while there’s no such thing as the perfect number of credit cards, it is important to make sure you manage the accounts you open in a responsible manner—only charging as much as you can afford to pay off in full each month.
Yes. When you apply for a business credit card, the credit card company will most likely check your personal credit and sometimes your business credit (if applicable) during the application process. When a credit issuer pulls your personal credit report, a hard credit inquiry may appear on your credit report. Hard credit inquiries will knock your FICO® Score down a few points temporarily, but will fall off your credit reports after two years.
Starting an LLC does not have an impact — positive or negative — on your personal credit. But if you open accounts for your business and provide a personal guarantee, those credit obligations might affect your personal credit at some point in the future. For example, if you open a business credit card and the account appears on your personal credit report, the account could impact your personal credit score.
When it comes to spending, it’s best to avoid using your business credit card for personal purchases. However, it’s fine to use the points and miles you earn with your business credit card for personal redemptions. In most cases, the rewards you earn with your business credit card are not treated as taxable income.
Each credit card issuer sets its own credit reporting policy. Several business credit card issuers (e.g., American Express and Chase) will only report account activity to the personal credit bureaus if you fall behind on your payments. Meanwhile, Bank of America, Citi and Wells Fargo business credit cards are reported not to appear on personal credit reports at all. It’s worth noting, however, that credit card companies can change their credit reporting policies in the future.
*The information for the Capital One Spark 2% Cash Plus and Capital One Venture X Business Card has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer.
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