Do business credit cards affect personal credit?

You may be surprised to hear that having a company credit card can affect your personal credit. As a business owner opening up a company credit card for your business you probably expect it to be kept separate from your personal credit.

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But that’s not always how it goes. If you lack business credit, your personal credit could be what the issuer reviews. Plus, late payments, increasing your credit utilization, and hard credit pulls can have an impact on your personal credit too.

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However, the degree to which a company credit card influences your personal credit depends largely on what type of card it is.

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How company credit cards affect your personal credit score

There are a few factors that determine whether your credit score will be impacted by your business credit card. Those include the type of card and its associated terms. It’s also dependent on who has opened the card as the primary cardholder and who is considered an authorized user. Much of the impacts that opening a business credit card will have on your credit score are similar to those from opening a personal card.

Credit card for business expenses

Opening a credit card can be a wise decision for small business owners, assuming they are using it for business purchases only. But if a new business without business credit is opening the card, then the personal credit score of the applicant will be considered instead.

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Having a business credit card can help business owners keep their business expenses separate from personal expenses, making tax time much easier. And it allows them to both build business credit and easily manage their business spending and budgeting all in one place.

Does a company credit card affect credit?

The degree to which a company credit card influences your credit differs between primary account holders and authorized users. And while there can be positive impacts to your credit score from a company credit card, there could be negative ones too. Just like with any credit card, if mismanaged, a company credit card could lead to a damaged credit score.

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If you’re the primary account holder

A primary account holder on a small business credit card is typically the owner of a company. The person who applies for and is approved for the credit card is the primary account holder. In most cases this wouldn’t be an employee.

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When opening up a small business credit card as a primary account holder for a new business, you offer a personal guarantee of repayment. Thus, although the card is intended for business purposes, reckless usage, high debt, or irresponsible repayment schedules can still reflect on your personal score.

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The process of getting approved for a business card is often the same process as it would be for a personal credit card. The necessary documents might be slightly different, but the general process is not. You will fill out an application with the card issuer and then they will want to review your business’ finances, and your personal finances.

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Your individual credit history, credit score, and payment history may be checked by the credit card issuer. When that happens, your credit history and credit score will be checked as an individual, not as a company or as a business. The issuer will likely check your credit with the three major consumer credit bureaus: Experian, TransUnion, and Equifax.

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If you’re an authorized user

Being an authorized user on the primary user’s card can be a benefit or a detriment to the authorized users credit depending on a few things. The first is whether the card issuer reports authorized users to the credit bureaus. If they don’t report authorized users in addition to the primary cardholders, then being on the card won’t help or hurt the authorized user’s credit. 

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The drawback is that if the card issuer does report the authorized user to the credit bureaus, then the actions of the primary cardholder could hurt the authorized user’s credit too. Business owners should check whether the specific card they’re considering does report to the credit bureaus, and who is included in that report. And be sure to let the authorized users know how the card can impact their credit. 

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So, does a business credit card affect your personal credit? In short, it can. But it depends on the exact card program and associated terms. It can also depend on the corporate structure (e.g., sole proprietor vs. C-corp), as well as whether you’re the primary cardholder or the authorized user on the card.

Mitigating a company credit card's influence on your credit

To reduce the influence of a company credit card on your credit, there are three actions you can take:

1. Choose a corporate card: With a corporate card, you won’t have to worry about personal liability, reimbursement, or about changes to personal credit scores. However, for small businesses and startups, this is often not an option.
2. Make payments on time or early. And never over your credit limit. 
3. If you can, try to keep your credit utilization ratio below 30%. The best credit scores keep this ratio below 10%, but that might not be realistic for new businesses.

Ultimately, for individuals, using a corporate credit card is a much smarter financial decision than relying on a personal card and company reimbursements. 

Corporate credit card vs. charge card: Which affects credit more?

If one is considering getting a corporate charge card or credit card, your employees should not see any changes to their personal credit rating. You, the primary account owner, is the one who would most likely be impacted by getting a corporate charge card or a corporate credit card. But be sure to check the specifics of the card you’re applying for.

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While charge cards can still influence your credit score as a business owner, they tend to have less of an impact on credit than credit cards. This is because:

• Charge cards do not factor credit utilization ratios. Meaning that their impact on credit tends to be less acute than credit cards.
• Charge cards must be paid off at the end of every month. This prevents unpaid credit card debt from being reported to major credit bureaus. 

The only case in which a corporate charge card would affect your personal score is if the business made a billing mistake and added it in your name. If you see that a corporate charge card appears in a personal credit check, take steps to speak with the person in your company issuing charge cards to remove your name from the card.

Does using a personal credit card for business affect credit?

As an employee, using a personal credit card for business expenses can influence your credit score. Many companies will request receipts at the end of the month and reimburse you for purchases, but the wait time on this can be long.

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Credit bureaus will see extra charges and see a higher credit utilization rate, negatively impacting your score. Avoiding instances like this is a major benefit of business credit cards. And a reason businesses may want to consider transitioning to company cards.

How do you know if a company credit card is affecting your credit?

Typically, there are two ways of knowing whether a small business credit card is affecting your credit. Those are:

• Whether a credit inquiry was made when opening the card
• Whether your name is on the card

If neither applies, a company credit card likely won’t alter your credit score. However, the only way to be sure is to review your credit report to see if the card in question is included, as well as to check the exact details of that card and how it handles reporting. 

Finding a card that works for your business

The size of your business tends to be one of the largest determining factors when it comes to which kind of card you can select for your business. And the effect it will have on your credit scores. The best business charge cards for startups minimize impact to your personal credit and do much more. Some providers even offer separate business travel credit cards for teams on the road.

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With a corporate charge card from Ramp, you can ensure you have a card that doesn’t affect your credit score when you apply. Unlike a traditional business credit card, a charge card like Ramp requires you to pay the balance in full each month—but it also comes with some significant benefits.

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What’s more, with Ramp’s advanced spend controls, you can automate away many of the situations that would negatively affect both personal and business credit scores. Enact spending limits, automate expense reports, and gain a firm grasp on your company’s financials. Plus, when used responsibly, you could help improve your your personal credit score while you’re at it.