Does a business credit card impact my personal credit score?

Quick insights

• A business credit score is a number that lenders may use to assess the creditworthiness of your business.
• There are a few ways a business credit card could potentially impact your personal credit score.
• You may be asked to sign a personal guarantee that requires you to pay back any business credit card balance if your business cannot pay.

If you’re looking for a way to finance the expansion of your business, a business credit card may be a way to access credit. But what, if any, impact does this have on your personal credit? It’s possible that a business credit card could affect your personal credit in a few circumstances.

Read on to learn how business credit cards could affect your personal credit and what you can do to potentially help minimize any negative effects.

What is a business credit score?

Your business credit score is a number that is used to measure the financial health of your business. It’s like a personal credit score, but it applies to your business. You can typically find this number on a business credit report.

If you apply for a business credit card or other financing, your business credit score may be used by lenders to assess your business’s creditworthiness. The credit score is based on a number of factors, including:

• Debt and debt usage
• Payment history
• Length of credit history
• Risk in the business’s industry
• Company size

Several reporting agencies issue business credit scores. There’s little standardization for the ranges. Some range from 0 to 100, some from 0 to 300. Others use the same range as consumer credit reporting agencies. Regardless of the range, a higher score may indicate to lenders that your business is less risky.

Some business owners pay attention to their business credit scores because this measurement may potentially help them get access to lower interest rate business financing, qualify for certain business loans and also reduce insurance premium costs.

How a business credit card impacts your personal credit score

There are many benefits to a business credit card, but in some cases, this popular payment method could impact your personal credit score.

If you apply for a business credit card, it’s possible that this hard inquiry on your credit could lead to a small drop in your personal credit score. According to Experian, hard inquiries remain visible on your credit report to lenders for two years, but you’ll only see a direct impact on your credit score for up to a year.

Why do business credit card issuers care about your personal credit history? Most issuers require you to sign a personal guarantee. The personal guarantee is an agreement that you will personally pay back the card balance if your business doesn’t have the funds to do so. 

If you use a business credit card responsibly and make payments on time, most card issuers won’t report your activity to consumer credit bureaus, but there are some exceptions. It’s possible that issuers will notify these bureaus if you are late with a monthly payment or have a delinquent account. However, all activity, both positive and negative, is typically reported to commercial credit bureaus.

Employees who have been issued employee credit cards on your account won’t see any impact to their personal credit score.

How a business credit card appears on your personal credit report

If any business credit card activity is reported to consumer credit bureaus, it will appear similarly to any personal credit card activity on your credit report.

This activity could affect your payment history, credit utilization and the length of your credit history, among other factors.

If you would like to minimize any negative impact to your personal and business credit scores, it may be helpful to keep your business credit card balance under your credit limit and make timely payments.

In summary

Business credit cards may offer your business many benefits, but in a few instances, the card could have a negative impact your personal credit. Consistently making on-time payments and keeping your balance under your credit limit may help you limit impact to your personal credit score.

If you’re interested in business credit cards, it may be a good idea to evaluate your options based on the rewards and benefits that interest you