Does a company credit card affect your personal credit score?

As businesses grow, efficiently managing expenses isn’t just important; it’s crucial. One common tool used by companies for this purpose is the business credit card, designed to help streamline and separate business-related spending from personal finances. However, a frequent question pops up when it comes to business credit cards: Do business credit cards affect personal credit? The answer isn’t always straightforward.

While some business credit cards may affect personal credit, others may have little to no influence. This guide explores how different types of business credit cards function, the factors influencing their impact on personal credit, and ways to mitigate potential risks. Let’s dive in.

Business credit cards vs. personal credit cards

Business credit cards differ from personal credit cards primarily in their intended use. Let’s see how this is broken down.

Key differences

While personal credit cards cater to individual expenses, business credit cards support company-related expenses, offering perks that align with business needs—such as travel rewards, higher spending limits, and tailored reporting features. Another key difference is that business credit cards may or may not report activity to personal credit bureaus, while personal cards always impact your personal credit report.

Benefits of business credit cards

Using a business credit card has many advantages, including helping you build business credit, which can lead to better financing options as your company grows. Additionally, separating business expenses from personal expenses can simplify bookkeeping and ensure tax compliance.

How business credit cards affect personal credit

So, do business credit cards actually affect your personal credit score? Well, it depends. Let’s find out more.

Do companies check your credit score before issuing employee’s corporate cards?

When an individual is issued a personal credit card, their credit history is reviewed to determine whether they’re eligible for the card, and what their limit might be. However, for many large companies, corporate credit card programs are issued after reviewing the business’s account, meaning they’re not tied directly to the employee’s personal credit score. In contrast, small businesses or startups may require employees to undergo credit checks, especially if the card application involves a personal guarantee.

Personal guarantees

A personal guarantee is often required when business credit isn’t fully established. By signing a personal guarantee, you agree to cover any debts if the business defaults. This commitment means any defaulted payments can appear on your personal credit report, impacting your credit score negatively. For example, if you miss payments or max out the card, this activity could show up in your personal credit report and potentially hurt your credit score.

Reporting to personal credit bureaus

Some business credit cards report payment activity to personal credit bureaus like Experian, Equifax, and TransUnion. Whether a card company reports depends on the issuer. For instance, American Express business cards generally don’t report to personal credit bureaus unless there’s a default, while cards from Capital One might. It’s important to confirm with the card issuer to understand if and how your business card will affect your personal credit.

Usage and payment behavior

If a business card is linked to your personal credit report, usage and payment behavior are crucial. High utilization rates or late payments can adversely impact your score. Keeping balances low and making timely payments will minimize any potential negative effects on your credit.

Factors that influence the impact on personal credit

The following are some factors that might influence the impact of business credit cards on your personal credit score.

Card issuer policies

Each credit card issuer has unique reporting policies. Some will report business card activity to personal credit bureaus, while others only report in cases of delinquency. Understanding the issuer’s policies can help you anticipate potential impacts on your personal credit score.

Credit limit utilization

Even when using a business credit card, keeping your credit utilization below 30% is generally recommended. High credit utilization on a business card that reports to personal bureaus could reduce your credit score.

Timely payments

As with personal credit cards, timely payments are critical. Any missed or late payment can hurt your credit, especially if the card issuer reports business activity to personal credit bureaus.

What are some situations where business credit cards impact personal credit?

How do business credit cards affect your personal credit score? Here are some situations where they could impact your personal credit score.

Startup phase of business: Startups often rely on the founder’s or employees’ credit to secure funding. In these cases, using a business credit card may directly impact personal credit if the card issuer requires a personal guarantee. Founders should be aware of these implications and look for ways to build business credit to separate personal finances from the business.
Small business owners: Small business owners who are sole proprietors or use their personal credit to secure a business credit card may see the most significant impact on their personal credit. Establishing business credit early can help to reduce reliance on personal credit.
High credit utilization scenarios: If your business frequently has high expenditures, it’s best to keep utilization low to minimize any risk to personal credit. Business owners with high monthly expenses might consider setting up a system to pay off balances frequently or applying for a card that doesn’t impact personal credit.

Whose credit is actually affected?

Primary cardholders and authorized users
For most small business credit cards, the primary cardholder’s credit is affected if the issuer reports to personal credit bureaus. Authorized users may not see an impact unless they’ve personally guaranteed the card.

Employees with corporate cards
Employees using a corporate card for a larger company are generally not at risk of credit impacts, as the card remains tied to the company’s credit, not the individual’s.

Mitigating negative impacts on personal credit

It’s important to take action in order to mitigate any negative impacts on personal credit from using a business credit card. Here are some ways to do just that.

Tips for responsible credit management

Ensure you make timely payments and keep utilization low to protect your credit. Tracking expenses by doing regular credit card reconciliations can help you maintain a lower balance and avoid late payments.

Using separate cards for business expenses

To avoid any mix-up between personal and business expenses, use a dedicated card for business expenses. This will allow you to stay razor-focused on your business spending and make identifying opportunities for savings or budgeting a breeze.

Monitoring personal credit reports

Regularly monitor your personal credit to check if a company card is affecting it. This approach will help you stay informed and act quickly if any adverse impacts appear.

Are there business cards that don’t affect personal credit?

Corporate cards, such as the Expensify Card, offer an alternative to traditional business credit cards and don’t impact personal credit. These cards are ideal for companies that want flexible spending options without requiring personal credit checks or personal guarantees. The Expensify Card provides additional benefits, including realtime transaction tracking, unlimited virtual cards, cash-back rewards, and flexible spending limits. It’s also easy to use the Expensify card for business travel, so you can easily track business expenses.

Plus, by using the Expensify Card, businesses can enjoy seamless integration with Expensify’s expense management tools, with savings of up to 50% off their monthly bill.

Try the Expensify Card today!

FAQs

Yes, if the card issuer reports business card activity to personal credit bureaus, late payments can negatively impact your credit score. It’s essential to make timely payments or set up automatic payments to avoid this.
Opt for business credit cards that do not report to personal credit bureaus, or consider a corporate card option like the Expensify Card, which doesn’t require a personal guarantee and offers expense management features.
Do business credit cards affect your personal credit? Business credit cards may appear on your personal credit report if the issuer reports activity. However, some business credit cards only appear in cases of missed payments or defaults.
If you’re required to use your personal credit card for business expenses, be sure to submit reimbursements promptly to avoid carrying high balances. Alternatively, request a dedicated company card for business expenses to avoid personal credit impacts.

Ready for a corporate card that’s tailored to your business needs?

Explore the Expensify Card today to enjoy seamless expense tracking, cash-back rewards, and full control over employee spending. Enter your information below, and we’ll take it from there.

Does a company credit card affect your personal credit score? Find out.