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Do Business Credit Cards Affect Personal Credit?

Do Business Credit Cards Affect Personal Credit?
Susan Guillory
Susan GuilloryUpdated May 4, 2023
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Getting a credit card for your business is a good way to separate your business and personal spending and start building a separate credit profile for your business.It’s important to understand, however, that applying for and using a business credit can potentially have an impact on your personal credit score. One reason is that applying for a business credit card can result in a hard inquiry on your personal credit. Another is that some business credit card issuers will report negative information to the consumer credit bureaus, meaning that if you get behind on payments, both your personal and business credit could take a hit. Here’s what you need to know about business credit cards and personal credit.

What Is a Business Credit Card?

Simply defined, a business credit card is a credit card that is designed to be used for business, rather than personal, spending. Business credit cards generally work in the same way as personal credit cards, except that they tend to offer benefits and features that are suited to businesses, such as a higher credit limit, expense monitoring, employee cards, and rewards geared toward business spending. Recommended: Business Credit Card vs Personal Credit Card

Business Credit vs Personal Credit

To understand how a business credit card might impact personal credit, it helps to understand the difference between business credit and personal credit.

Business Credit

Your business credit history is linked to you by your Employer Identification Number (EIN) or Tax ID Number, which is how the government recognizes your business for tax purposes. Business credit reports are compiled by the commercial credit bureaus — Dun & Bradstreet, Experian, and Equifax (note that Experian and Equifax have both personal and business credit reporting services). These bureaus generally grade business borrowers on a scale of 1 to 100. The key factors that impact your business credit score typically include how you pay your bills, how much debt you carry, and what type of industry you’re in. Your business isn’t born with a business credit score, however. 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.

Personal Credit

Your personal credit history is connected to you by your Social Security Number and curated by the three major consumer credit bureaus – Equifax, Experian, and Transunion. 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.Your personal credit score, which falls between 300 and 850, is based on multiple factors, including your payment history, how much of your available credit you are currently using, the length of time you’ve had credit, mix of credit types, and recent credit inquiries.If you don’t have any 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.

Does a Business Credit Card Affect Personal Credit?

It can. When you apply for a business credit card, you’ll have what’s called a hard inquiry on your personal credit, which can result in a temporary ding on your personal 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. This means that, if your business doesn’t pay the credit card bill, you will be held personally responsible for doing so.Many business credit card issuers report your payment activity just to the commercial credit bureaus and will only report negative activity, such as several months of nonpayment or late payments, to the consumer credit bureaus. This means that if you run into difficulty paying your business credit card bills, it could have a negative impact on both your business and your personal credit.Some business card issuers, on the other hand, will report all of your activity to both the consumer and the commercial credit bureaus. This means that using your business card responsibly could have a positive impact on both your personal and your business credit scores. 

Types of Business Cards That Don't Affect Personal Credit

There are actually some business cards that don’t report any activity — even negative information — to the consumer credit bureaus. If you’re concerned that a business card could have a negative influence on your personal credit, and want to keep your credit profiles completely separate, you may want to do some research and find a card that only reports to the commercial bureaus.Keep in mind, though, that when a business credit card doesn’t report to the consumer credit bureaus, it means you can’t build personal credit with the card. 

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 some 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. While banks generally have strict qualification requirements, such as excellent personal credit and at least two years of business history, online lenders tend to have more flexible criteria. Online loans are also usually faster to fund. However, rates tend to be higher.

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). And, you only pay interest on the money you actually borrow.But one major difference is that lines of credit provide cash, whereas credit cards let you charge purchases with the card. Business credit lines also tend to be larger and rates are typically lower than those offered by business credit cards.

Merchant Cash Advances

If you need quick cash, don’t have good credit, and your business has credit and debit card sales, you might look into a merchant cash advance (MCA). An MCA isn’t a loan but, rather, an advance on future sales. You receive cash up front then pay it back (plus interest and fees) with an automatic debit from your daily or weekly credit and debit card sales.

Funding Small Businesses

Opening a business credit card can help you keep your expenses organized and build a separate credit profile for your business. Just keep in mind that a business credit card can affect your personal credit. This is due to the initial hard inquiry when you apply for a business card, and the fact that some business card issuers report negative payment history to both the business and consumer credit bureaus.If you’re interested in exploring all of your business financing options, Lantern by SoFi can help. With our online debt financing marketplace, you can search for business loan options without scouring the web and checking multiple sites. With one short application, you’ll be matched with a loan option that meets your company’s needs and qualifications.Find the right financing solution for your small business on Lantern's Marketplace.

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Photo credit: iStock/Hispanolistic
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About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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