Business credit cards are designed to separate business expenses from personal expenses. Rather than using your personal credit card to make large purchases, you can use your business card and easily keep track of your expenditures. Despite this separation though, most business card issuers will require a personal guarantee for the card, in the event that the balance is not paid off. This brings up a valid question: “Does my business credit affect my personal credit score?”
Let’s take a closer look at how business credit and personal credit connect with one another so you can prepare for the chances to come.
How Business Credit Card Issuers Report to Credit Bureaus
Your payment history and account activities can be reported to two different sets of credit bureaus: consumer credit bureaus and commercial credit bureaus. The consumer credit bureaus are in charge of your personal credit score, while the commercial ones are in charge of your business credit score.
Different credit card providers report to different sets of bureaus. Nearly all of them will report business credit card transactions to commercial credit bureaus, but many will not report activities to consumer credit bureaus. Bank of America, Chase, Wells Fargo, and Citi all report to commercial bureaus but not consumer bureaus. That means that the activity on your business credit card will not have an impact on your personal credit (see the exception to this in the next section).
If you’re looking to boost your personal credit score with your business card, you will need to make sure your bank reports to consumer credit bureaus. American Express, Capital One, and Discover do so for their business credit cards. Just keep in mind that late payments on your business card will have a negative impact on your personal credit at this point, but they may not with the non-reporting card issuers.
Severe Delinquencies Will ALWAYS Hurt Your Personal Credit
Assuming that you signed off as the personal guarantee for your business credit card, you will be the one that has to pay for a delinquent balance. If the card company sends your balance to collections or sues you for the money, your personal credit will be hit just as bad – if not worse – than your business credit. Payments that are 30 days late may not be reported to consumer credit bureaus, depending on your bank, but severe delinquencies will no matter what. That’s why it’s so important to keep up with your business credit card payments.
Only the Primary Cardholder Is Affected
If you have employee accounts tied to your business credit card, your employees will not see any changes to their personal credit. Only the primary cardholder (which typically doubles as the personal guarantee) will receive the positive or negative effects of the business account on his or her personal credit. Keep this in mind as you start giving out secondary cards to your employees because you will be the one responsible for paying the balance. Monitor your employees’ transactions closely, and confront them about any unauthorized transactions before they hit your credit.