Business credit cards and your personal credit

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In a Nutshell

Using a small-business credit card is one way you can build your business credit — but depending on the card issuer, it can affect your personal credit too, particularly if you fall behind on payments.

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Small-business experts recommend keeping your business and personal life separate.

But when it comes to your credit, that can be hard to do. A business credit card can help you build your business credit, but it may also affect your personal credit history.

Here’s what you need to know about your business credit card and how you can use it to help your personal credit instead of hurting it.


How do business credit cards affect personal credit?

Here are three ways that applying for and using a business credit card could affect your personal credit history.

1. A credit inquiry when you apply

When you apply for a business credit card, the card issuer may consider both your business’s track record and your personal credit. This could include running a hard credit check on your personal credit, which could drop your credit scores by a few points.

Many business credit card issuers require that you sign a personal guarantee when you apply. This means that if your business defaults on payments, you can be held personally liable to repay the debt.

2. Your ongoing credit utilization

Some business credit card issuers report all of your account activity to the three major consumer credit bureaus (TransUnion, Equifax and Experian), including your credit utilization ratio — your balances divided by the total of all your credit card credit limits. This means that if you rack up a high balance on your business credit card, it could have a negative impact on your personal credit.

Many credit experts recommend keeping your credit utilization on all of your credit cards below 30%. That can be easier with business credit cards, because they can come with higher credit limits than consumer credit cards.

But if you need to make a large investment in your business, it may be better to get a business loan than to put it on your card.

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3. Reporting a delinquency

Some of the major business credit card issuers may not report your monthly account activity to the three main consumer credit bureaus. But they might report on your account if you stop making payments.

Late payments are typically reported once you’re more than 30 days late. If you reach that point, the negative mark can wreak havoc on your personal credit and stay on your reports for up to seven years.

It’s impossible to say exactly how serious the affect will be on your personal credit with a delinquent account. But considering that payment history is one of the most important factors in your personal credit scores, it could affect your ability to borrow affordably in the future.

Read more: How late payments can affect your credit

What’s more, a late payment could trigger a penalty APR, which can be as high as 29.99% with some cards, making it even harder to stay on top of your payments.

Policies of business credit card issuers that could impact your personal credit

Each credit card issuer has its own policy for how it handles business credit card activity and your personal credit. We reached out to some of the major issuers to ask when they might report your business card information to the consumer credit bureaus. Of course, an issuer’s policies may change at any time, so it’s worth checking to get the latest info periodically — but here’s what they told us.

  • American Express: Reports if your account isn’t in good standing.
  • Bank of America: Reports if the account is delinquent.
  • Barclays: May choose to report, depending on the situation.
  • Capital One: Reports account activity.
  • Chase: Reports if the account is more than 60 days delinquent.
  • Citi: May not report account activity.
  • Discover: Reports account activity.
  • S. Bank: May not report account activity.
  • Wells Fargo: May not report account activity.

Another important note: The meaning of terms like “good standing” and “delinquent” can vary by issuer, as well. If you’re wondering whether a credit card issuer will report your business card activity to consumer credit bureaus, call to find out its policy.

You can also check your personal credit reports from Equifax and TransUnion on Credit Karma. For once-a-year reports from all three major consumer credit bureaus, try AnnualCreditReport.com.

It’s always a good idea to call before you apply for a business credit card to find out how the card issuer reports. This practice can prevent surprises later on that could have negative implications.

Using a business credit card to build your personal credit

If you’re concerned about the potential impact a business credit card could have on your personal credit, there are things you can do to make it a good experience instead of a bad one.

The key is to practice the same good credit behaviors with your business account that you do with your consumer accounts. Here are just a few.

Pay on time, every time

Payment history is a major factor in your personal credit scores. So if your card issuer reports payment activity, paying at least the minimum payment on time each month can help boost an improving score or solidify an excellent one. And if you want to go the extra mile, paying off the balance in full and on time each month can help you avoid interest entirely.

Keep your balance relatively low each month

Your credit utilization can affect your personal credit scores, so keeping a low balance is a good move. You can accomplish this by using the card less often or making multiple payments every month. And don’t worry if your utilization spikes one month — your scores can bounce back once you’ve paid down your balance and your utilization ratio is back to normal.

Be wise about when you use your card

Business credit cards can be a great way to pay for operating expenses. But if you need to finance inventory or equipment, it can be harder to pay that off quickly.

What’s more, you may qualify for a lower interest rate with a business loan or some other form of financing. Consider all of your options before you pick one.


Bottom line

While it may be a good idea to get a small-business credit card for your company, it’s important to understand how it can affect you personally.

In general, practicing good credit habits can help you protect yourself and your personal credit — and can also help you build your business credit along the way.