Do Business Credit Cards Affect Your Personal Credit Scores?There are a lot of reasons why a small business owner would want a business credit card, from building commercial credit to earning rewards for office supply purchases. However, if you’re considering a business credit card, you might be worried about whether it will affect your own personal credit scores. Unfortunately, the answer is more complicated than a simple yes or no, and it changes depending on your credit provider’s policies and how you’re using your card. Whether you’re trying to keep your small business and your personal finances as separate as possible, or you want a way for your business’ success to help your own credit, read on to see how you can use a business credit card to help meet your goals.

Does applying for a business credit card affect personal credit scores?

Unless you already own a successful business, you’ll most likely have to apply for a business credit card using your personal credit scores and credit history. This means that the hard credit inquiry from the application will show up on your personal credit reports. If you’ve been applying for personal credit cards recently and received several other hard inquiries, that could slightly ding your credit scores, as well as lower the chances of your business credit card application getting approved. Additionally, almost all small business credit cards require the main cardholder to sign a personal guarantee, which makes them personally responsible for any debts the business can’t pay. If the business defaults on its credit card debt, those debts will likely appear on the main cardholder’s credit reports and can severely damage their personal credit scores.

Does using a business credit card affect personal credit scores?

According to a report from the Consumer Financial Protection Bureau, credit card issuers generally do not report the activity on your business credit card to your consumer credit reports, so using your business credit card typically won’t influence your personal credit scores. Instead, those issuers will report to your business credit reports, which are run by the credit bureaus Equifax, Experian and Dun & Bradstreet. Business credit bureaus use a similar set of criteria to calculate your credit scores as the consumer credit bureaus, but instead of using a scale that goes from 300 to 850, they use a scale that goes from 0 to 100, with 100 as the best score. Building business credit is really helpful for entrepreneurs, because having higher business credit will let your business borrow money with more favorable terms and may let you get lines of credit for your business without a personal guarantee.

There are a few of exceptions to this rule, though. First, some credit card issuers do actually report all business credit card activity to the main cardholder’s personal credit reports, in addition to their business credit reports. While this runs counter to the plan of keeping your business and personal finances separate, it can improve your personal credit scores if you pay your business debts on time. You will need to be careful about your credit utilization ratio, though, because if your business credit account runs close to its credit limit every month, it can hurt your personal scores. Second, some of the credit card issuers that don’t normally report your business credit card activity to your personal reports will start doing so if you fall behind on your payments. They’ll only report the negative items, though, so they effectively give you the downsides of personal credit reporting with none of the benefits. To find out which policy a credit card provider follows, you’ll likely have to call it, as most card providers don’t publish their business credit reporting practices. Finally, as previously mentioned, if your small business defaults on its credit card and the card had a personal guarantee, those debts will show up on the main cardholder’s personal credit reports.

When you’re running a small business, it’s almost impossible to avoid some overlap between your business’ finances and your own. By choosing the right business credit card, you can minimize or maximize that overlap by a significant amount. To find more tips for starting or growing your business, follow our small business blog.