How a Business Credit Card Affects Your Personal Credit Report
Is a Business Credit Card Part of Your Personal Credit Report?
When it comes to credit matters, it's always a good idea to cut right to the chase. So yes, any business credit card you have through your company can affect your credit report. How those business card charges affect your credit report, however, can depend on you — more specifically, how you choose to handle your company's decision to grant you a business credit card.
As it is with anything related to your credit report, business credit card activity can affect your chances for getting a mortgage — just as any activity on your credit report can affect your credit score. So, to avoid undo credit problems, there are a few things you can do to safeguard your credit report and your corresponding credit score.
Can I ensure that my company — not I — takes responsibility for business credit card payments?
Since your credit score is determined by a combination of all your credit activity, it is in your best interests to make sure that your employer is not late with credit card payments that bear your name.
When your company provides you with a business credit card, it does so to help you do your job better — to ensure that you can make business-related charges when the need arises. That said, many companies will ask that you apply for a business credit card directly, to check your credit worthiness.
Once you apply for the card and your application is approved, oftentimes the company will simply assume payment responsibilities from there. This can work out to become a strong business relationship, but the fact remains that applying for the card (at the company's request) does produce an inquiry on your credit report — a standard inquiry, because you are applying for a new card — but it is still an inquiry on your credit history, and it could one day affect your credit score.
For example, although it is not very likely, if your employer makes even one business credit card payment late, when the card is in your name, it could damage your credit score. Even a drop of 30-50 points on your credit score could result in higher interest rates for home loans.
Is there anything else I can I do if I don't want a business credit card in my name?
You are perfectly within your rights to tell your prospective employer that you want to use a personal credit card to cover your business expenses. One approach might be to suggest that you want to earn frequent flyer miles on your personal card, or that you hope to earn additional "points" through the many different rewards programs offered by credit card companies. Most — if not all — companies will allow this option, and it makes you solely responsible for all credit debt.
Do I need to worry if my business credit card bills are often high?
Just as it is with any of your personal credit cards, carrying a very high credit balance — for example, somewhere between $5,000 and $10,000 dollars — is not a good thing. The three main credit bureaus, TransUnion, Experian and Equifax, usually look at the ratio of your actual charges to your specified credit limit.
A good rule of thumb might be to keep your credit charges between 30-50% BELOW your credit limit amount. Using the example above, if you have a $10,000 credit limit on your business credit card, you want to keep your balance at or below $5,000 whenever possible — and even better, you should aim for a balance of $3,000 or less.
If my employer insists that I open a business credit card, how else can I protect my personal credit report and also my credit score?
In cases where your company mandates that you keep your name on the business credit card, you may want to consider opening additional cards, complete with high maximum limits in your name. This way, instead of having to make significant charges on one card — for example, one with a $10,000 limit that you may need for business charges — you can charge lower amounts to several other cards and better protect your credit score and your overall credit report. In other words, you will be better off charging less than 30% of your maximum credit limit on multiple cards, as opposed to charging a higher percentage to just one card.
Before you do this, though, be sure to check beforehand that your company will reimburse you for business charges to non-company credit cards.