Do Business Credit Cards Affect Personal Credit

Did you know that out of all the business credit cards available in the marketplace a small percentage report only to the business credit reporting agencies?

The good news is not all business credit cards impact your personal credit. If a card issuer only reports your credit limit, spending, revolving debt and payment history to a business credit agency then your personal credit will not be affected.

This is especially useful when making large business purchases using your business credit card. As you know credit utilization is one of the major factors that impact your FICO® scores. In my opinion, to completely separate business reporting from personal reporting, business owners should only use business credit cards that report solely to the business credit agencies.

The fact is credit card issuers have different policies when it comes to credit reporting. Now keep in mind the majority of business credit cards will require a personal guarantor so in the event that the business defaults on its payment obligations the guarantor will be ultimately responsible.

It is at this point that if the card isn’t paid and the account becomes delinquent, it will pop up on the guarantor’s personal credit report and dent his or her credit score, says Barry Paperno, consumer affairs manager at myFICO.com.

Do Corporate Cards Affect Personal Credit

A business credit card without a personal guarantor protects a business owner from any personal liability on the card altogether. So let’s review the three main types of business credit cards and how they report.

1. Personal Reporting – A business credit card issued in a company’s name does not necessarily mean the business owner’s personal credit is protected. Unfortunately, the majority of cards labeled as business credit cards report only to the owner’s personal credit reports.
2. Personal Reporting + Business Reporting – Business credit cards such as Capital One’s® Spark® Cash Select and Bank of America’s® Cash Rewards for Business MasterCard® report to personal and business credit reporting agencies.  Although cards such as these help establish the creditworthiness of a company they still affect your personal credit.
3. Business Reporting Only – High limit business credit cards issued by certain regional and national banks report only to business credit agencies such as Dun & Bradstreet, Experian Business or Equifax Small Business. These types of cards are ideal for building your company’s creditworthiness while protecting your personal credit at the same time.

Remember, any business credit card that impacts your personal credit can affect your ability to get a mortgage, auto loan or other personal financing – just as any activity on your credit report can affect your FICO® scores. So, in order to avoid putting your personal credit at risk, consider obtaining only business reporting cards for your company.

If you currently have an unsecured business credit line or card and want to know how it’s reporting, you can contact the card issuer, or check your personal credit reports to see if your card’s activity shows up. Whether the card you use for business is being reported on your personal reports or not, it’s essential that you know firsthand.

What can I do if all my company’s credit card debt shows up on my personal credit reports?

This is not an uncommon challenge facing business owners all across the country. Why not obtain a business credit card (business reporting only) and transfer your existing card balance to the newly established card that reports only to business reports? Not only will this instantly improve your personal credit utilization ratio but also improve your FICO® scores.

This strategy may also save your company thousands of dollars in interest. For example, our unsecured business credit lines (business credit cards) we get issued to our clients provide a 0% introductory APR for the first 6-12 months and only report to the business credit agencies.

Remember, not all business credit cards affect personal credit. However, just because the responsibility to repay rests with the business doesn’t mean the card issuer won’t decide to report to a personal guarantor’s report in the event of default. So it’s important to understand your card issuer’s agreement.  The good news is you can eventually get a personal guarantee lifted after several years of positive payment history.

Until next time…

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About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com,  have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.