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Do Business Credit Cards Affect Personal Credit?

Do Business Credit Cards Affect Personal Credit?
Susan Guillory
Susan GuilloryUpdated November 9, 2021
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If you’re thinking about your personal credit and what might impact your score, congratulations. Being aware of factors that could affect your credit score can be the first step toward improving your credit.But if you run a business, you also need to think about building business credit. And it’s important to realize that your business doesn’t automatically have a credit profile. You’ve got to work on building it.To that end, start thinking about ways you might be able to work on your business as well as your personal credit. Bear in mind that business credit scores are figured on a different scale than personal credit scores and compiled by a different credit bureau. It can be helpful to learn more about business credit and how to grow it

What Is a Business Credit Card?

Let’s start with the basics. In case you’re not familiar with business credit cards, let’s first define what they are.A business credit card is similar to a personal credit card in that you can make purchases with it. Each month, you’ll receive a statement that lists the purchases you’ve made plus the interest on those purchases. You’re required to pay at least a minimum amount monthly, and what you don’t pay will continue to accrue interest.The key difference is that a business credit card is for business purchases, whereas a personal card — you guessed it — is for personal purchases. A business credit card may be designed for business use and include features like a higher credit limit, expense monitoring, and/or rewards programs that are geared toward business use. 

Business Credit vs Personal Credit

While there are a few similarities between business and personal credit, there are also differences to be aware of. Here’s a summary.Now let’s take a deeper look at both kinds of credit.

Business Credit

Your business isn’t born with a business credit score. You must perform certain credit-building activities to establish and grow it, such as:
  • Taking out a trade line (a credit line with a vendor)
  • Opening and using a business credit card
  • Applying for and paying back a business loan or line of credit
If you have no business credit history, or your business credit score is low, you may not qualify for some types of financing, such as bank or SBA loans, or even some business credit cards.Finally, it’s important to know that there are sadly fewer regulations protecting your business credit. If there is a discrepancy on your business credit report, you may have difficulty getting it removed to try to get your score back up.

Personal Credit

Many people begin building their personal credit when they graduate high school and start doing “adult” things like buying a car or opening a personal credit card account. These activities, as well as buying a house and taking out other loans, will help build personal credit over time.If you don’t have business credit history, lenders and credit card issuers may instead look at your personal credit history and score to determine eligibility. Even if you do have business credit history, they may want to look at both. It’s up to each lender.And when it comes to opening a business card vs a personal card, know that you have a few more layers of protection on the personal side. For example: if you review your personal credit report and see a credit card still appearing that you closed a year ago, you can easily report this error to the credit bureau and have it removed from your account. That’s not the case with business credit reports.

Does a Business Credit Card Affect Personal Credit?

If you’re wondering whether a business credit card affects personal credit, the answer is that it might, especially if you don’t have an established business credit history.When you apply for a business credit card, you’ll have what’s called a hard inquiry on your personal credit. The same thing happens if you apply for a personal credit card, a loan, or a line of credit. Typically this is a temporary ding on your credit score and won’t negatively impact it long-term.The reason this initially impacts your personal credit is because, even though you’re applying for a business credit card, you may have to personally guarantee the card, meaning that, if your business doesn’t pay the credit card bill, you will be held personally responsible for doing so.Some credit card issuers may report activity on your business credit card on your personal credit only if there is negative activity, such as several months of nonpayment or late payments. But depending on your issuer and who it reports to, using your business card responsibly does have the potential to help your personal score. 

Types of Business Cards That Don't Affect Personal Credit

Maybe you know you have bad personal credit and are afraid that will keep you from opening a business credit card. The good news is that you probably can open a business credit card with bad personal credit. Certain credit building cards have lower requirements in terms of your credit score. Some are secured, meaning that you have to put down a deposit to use them. Some have lower credit limits. But if you use your card responsibly, paying your bill on time (and in full, when you can), you can build your personal (or business) credit and qualify for cards with fewer restrictions.

Other Forms of Business Credit

Business credit cards are just one type of financing you can use to buy what your business needs and build credit history for your business. Here are other options.

Small Business Loans

Many businesses take out small business loans, from banks, credit unions, and online lenders, to cover expenses like payroll, inventory, and equipment. They often require higher credit scores but may have lower interest rates.

Small Business Lines of Credit

When it comes to credit cards vs lines of credit, there are a lot of similarities. Both give you access to funds you can spend up to a certain amount (as compared to loans, which provide you with cash in a lump sum).But a major difference is that lines of credit provide cash, whereas credit cards let you charge purchases with the card. 

Merchant Cash Advances

Now that you better understand what business lines of credit are, let’s look at one final form of business credit: the merchant cash advance (or MCA). This isn’t a loan but rather an advance on future sales. You pay it back with an automatic debit from your daily or weekly credit and debit card sales, along with the fee that the MCA company takes.

Funding Small Businesses

So, to review, does a business credit card affect your personal credit? It can. But if you exercise smart credit habits like paying your bill on time, keeping your overall debt down, and regularly monitoring your credit scores, it will help build your business credit and possibly your personal credit as well.Is a business credit card not what you’re looking for? SoFi can help you with loans for small businesses. Enter a few details and get offers from multiple lenders in our network.

Frequently Asked Questions

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Photo credit: iStock/Hispanolistic

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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