Does a Business Credit Card Affect Personal Credit Score?

How Is a Business Credit Card Different From Personal?

Before answering the question of “does a business credit card affect personal credit,” you need to understand the main differences between a business credit card and a personal credit card.

Business credit cards report to business credit reporting agencies – commercial credit bureaus. Your personal score is managed by consumer credit bureau. Therefore, the way you use your business credit card will not be processed by the agency that manages your personal credit score.

What Do Issuers Report to the Consumer Credit Bureaus?

Issuers report credit information to consumer credit bureaus, which generate a credit report. Such reports usually include: credit limit, credit utilization, and payment history.

Your payment history is one of the most significant factors in your credit score. If you have missed payments or made late payments, this will negatively affect your credit score. Additionally, your credit utilization ratio (the amount of available credit you’re using) is also factored into your score. It’s generally best to keep your credit utilization below 30%, but the lower, the better.

Differences Between Business and Personal Credit Score

Personal and business credit scores are calculated differently. Personal credit scores are primarily based on your payment history and amount of debt. Business credit scores also consider the size and industry of your company, and public records like lawsuits or bankruptcies. Additionally, personal credit scores range from 300 to 850, and business credit scores range from 0 to 100.

How Can a Business Credit Card Affect Personal Credit

So, how exactly does a business credit card affect personal credit score? The answer is: indirectly. Let’s say you are personally liable for the debt on the business credit card (such as being the sole proprietor of your company). Missed payments or high balances will reflect poorly on your personal credit report.

Additionally, negative business credit card activity is often reported to consumer credit bureaus. This means that irresponsible use of a business credit card could potentially damage your personal credit score.

Editor’s Tip

When applying for a business credit card, always ask the clerk about the reporting process. They will tell you to whom they disclose your data, and what they use it for. 

Should You Get a Business Card for Your Small Business?

The question of “does a business credit card affect personal credit” is frequently asked by small business owners. Credit cards help small businesses manage cash flow and track expenses. But there are some drawbacks to it, too. Here are some precautions one can take:

• First, decide if you’re willing to pay the annual fee.
• Second, calculate the expenses to income ratio.
• And finally, compare credit card offers to find the best credit card for your small business. 

How to Pick a Business Credit Card Issuer

When you’re choosing a business credit card issuer, you should consider how the card will affect your personal credit score. If you’re an individual with good credit, choose a business credit card that will report activity to the personal credit bureaus.

Are you interested in a rewards program? Some cards offer cash back or points for every purchase, or even special rewards for travel or other expenses. At last, you should consider the interest rate and fees, as well as the terms and conditions. 

So, Does a Business Credit Card Affect Personal Credit?

The answer is yes and no. A business credit card does not impact your personal credit score directly. However, if you default on payments or rack up a large amount of debt, it could affect your personal finances and your major credit score. 

Frequently Asked Questions 

Does a Company Credit Card in My Name Affect My Credit? 

It doesn’t. The business’ spending details aren’t usually disclosed in regard to the personal score. 

Can My LLC Affect My Personal Credit?

Yes. If your LLC goes bankrupt, and you gave a personal guarantee to the loan, your credit will be affected. 

What Are the Benefits of Having Business Credit?

Business credit allows for a safe investment. Basically, you borrow what you don’t have, so that you can have way more than that. Positive business payment history is also attractive to potential investors. 

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