When it comes to your business and personal lives, you’re a Ghostbuster — you know never to cross streams. But have you ever asked yourself, “Do business credit cards affect credit”? If so, you might have discovered that crossing the streams of your business and personal lives can potentially be a good or bad thing.
Most business financing requires you to sign a personal guarantee. But armed with the knowledge below, you can use a business credit card to help your credit rather than hurt it.
MoneyLion can help you explore business and personal credit card options tailored to different needs and preferences.
What is business credit?
Business credit functions similarly to personal credit, except it’s specific to your enterprise. It starts with opening up a line of credit and takes time to build.
To build your business credit score, you’ll need to take out debt and repay it on time. Lenders will look into your business credit score whenever you apply for financing. It can greatly impact your chances for funding and the interest rates you’ll receive. To improve your chances of getting your business financed and avoid high interest rates, you must keep your business credit in tip-top shape.
Business credit vs. personal credit
Business and personal credit give lenders information about your trustworthiness as a borrower. Both credit scores can affect your ability to secure financing and the interest rate you’ll receive on business loans.
The difference between them is your personal credit is tied to you, while your business credit is linked to your company. Your Social Security number ties your personal credit to you, and your Employer Identification Number (EIN) or Tax ID Number ties your business credit to your company.
Your personal credit will influence your ability to get a mortgage, car loan, and other types of financing, including credit cards with favorable interest rates. However, your business credit score will have the most noticeable impact on your company’s financing opportunities.
How do business credit cards affect credit?
Although your personal credit score exists separately from your business credit, there are times when the two can overlap. This is especially true with business credit cards and your credit score. Consider the following ways they might affect one another.
Credit Inquiries
Some companies may pull your personal credit when you apply for a business credit card. This is called a hard pull, and it may cause a small, temporary drop in your credit score that should resolve shortly.
Unfortunately, if your personal credit is poor, it can hurt your chances of getting approved for a business credit card. Your personal credit score can also affect the type of business credit card you qualify for, specifically the benefits package and interest rates. If your credit isn’t in great shape, you might consider improving your credit score before applying for a business credit card.
Ongoing credit utilization
Reporting your company’s credit use on your personal credit report may also impact your credit score.
Crediting scoring models like FICO and VantageScore look at the combined balances of your business and personal credit cards compared to your credit limit. A high balance-to-limit ratio, or credit-to-utilization ratio, is bad for your personal credit score and can be bad for your business credit, too.
Reporting delinquencies
A business credit card company doesn’t report your monthly account activity, however, if you stop making payments, the activity may still be reported to the credit bureaus. Credit card delinquencies are a serious financial strain that affects your score.
Personal guarantees
Most business financing requires a personal guarantee, whether a credit card or loan. This guarantee is your promise to repay your company’s debt if it can’t.
Policies for business credit card issuers
Here are some of the policies of business credit card issuers that could impact your personal credit.
| Card Issuer | Reports all activity | Reports in case of default |
| American Express | No | Yes |
| Chase | No | Yes |
| Bank of America | No | Yes |
| Capital One | Yes | Yes |
| Citi | No | No |
| Wells Fargo | No | No |
| Discover | Yes | Yes |
| BBVA | No | No |
Avoiding business and personal credit overlap
Although most banks and credit card companies reserve the right to report delinquency to personal credit bureaus, there are still ways to prevent your business credit card from impacting your personal credit score. Most of the strategies involve good credit practices.
Pay your card on time
Paying all your credit card bills every month and on time is crucial. Late payments are one of the biggest factors that can hurt your business and personal credit scores.
Keep your credit utilization low
You should refrain from using up your entire credit line at once. This impacts your credit utilization ratio, the amount of credit used compared to your total limit. Ideally, you want to stay within a low, healthy range of less than 30% to avoid a drop in your credit score.
Use your credit responsibly
Credit cards can offer many perks, like cashback and rewards points. However, if you’re not careful, you could wind up spending more than your means and being stuck with high-interest-rate debt. Not only will this hurt your business and personal credit scores, but it can also harm your finances. Make sure to think twice before charging large amounts.
Stay on top of your credit score
It’s important to monitor your credit score closely and check it regularly. Mistakes can happen, and credit bureaus aren’t immune from reporting errors. The sooner you catch such mishaps, the better your credit score will be.
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Don’t apply for too many cards
Most credit card issuers run a hard credit check on personal accounts even for business credit cards. This can cause a temporary dip in your score, which will resolve in time but can nonetheless create problems in the short run. Applying for multiple cards simultaneously or right after one another can exacerbate this problem.
Be prudent in approaching business credit cards
Do business credit cards affect credit? It depends. You’ll want to consider the chain of the events applying for one kicks off, including possible business and personal credit checks and the likely requirement of a personal guarantee. And, of course, don’t forget to check your credit score before applying.
FAQ
Do business credit cards help build credit?
Paying your bill on time, all the time, and staying well under your limit can build your business credit and, depending on the bank, your personal credit. This could qualify you for business financing later.
Is business credit based on personal credit?
Business and personal credit are separate. However, some banks will check your personal history to assess your creditworthiness, especially if you have no business credit history.
Do you need a D-U-N-S Number for business credit?
A D-U-N-S Number — a unique nine-digit number issued by Dun & Bradstreet, one of three business credit bureaus — isn’t required for all businesses to establish business credit. However, you’ll need a D-U-N-S Number to get your business credit score from Dun & Bradstreet and to secure government contracts.
