How does my business credit card impact my personal credit score?

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The intersection of personal and business credit is a curious one — particularly for small business owners who are just getting off the ground. The fact of the matter is, total separation is wishful thinking. It’s extremely difficult — if not impossible — to keep personal and business credit lines from influencing one another. While some card issuers may be more helpful in doing so than others, most business owners will need to rely on their personal credit at some point.

For example, what happens when you apply for a business card in the first place? How does the issuer gauge whether or not you’re creditworthy? And, what happens if you add an employee as an authorized user and they overspend so that you can’t meet your minimum payment? With certain checkpoints and consequences, there’s no other place for creditors to look than your personal credit history.

Know before you apply

None of the following meant to scare you off from applying for a business credit card.

Quite the opposite. Choosing a business credit card is a great option for small business owners who are looking to spread their large purchases out over time, cover costs during seasons of low cash flow and even earn rewards on guaranteed expenses.

More than anything, this is a reminder to stay aware of how closely intertwined your personal and business credit accounts truly are. Here’s a quick breakdown of the major business card issuers, and whether or not they report your business card’s activity to the standard consumer bureaus:

Issuer Number of business cards offered Business card activity reported to consumer bureaus
American Express 3 Yes
Bank of America 3 No
Capital One 5 Yes
Chase 6 Yes, if the account is delinquent
Citi 2 No
Discover 1 Yes

Read up on business credit scores

The moment you open a business credit card, you’ll start building your business credit — a separate score unique to your business accounts. Much like your personal score, your business credit score raises and lowers according to the length of credit, credit utilization, payment history and other factors determined by the business credit rating agencies. Unlike personal scores, however, business scores are public. They also grade borrowers on a 1-100 scale, unlike personal scores which fall between 300-850.

Some activity from some business cards can have an effect on both personal and business credit scores, while others will influence your business score alone. Comb through the details of every business card agreement and consult the review sites like ours so you know where your activity will be reported, and how much influence it’ll have on your personal credit.

Remember your credit utilization ratio

Your credit utilization ratio is the total amount of credit you’re putting to use, divided by the total amount of available credit you have on your lines of credit. Say, you have three credit cards — each with a $5,000 limit. If you have a $3,000 total balance over those three cards, you’d have a 20% utilization rate ($3,000 / $15,000).

Why is that relevant to your business cards? Some issuers will factor your business card into your personal utilization rate, while others won’t.

Make sure you know what you’re dealing with — business cards tend to have higher limits, which could have a heavy influence on both the numerator and denominator in the math above. If you’re putting large expenditures on your business card, that could throw off your utilization rate.

Credit checks still count

Applying for your first business card often requires a hard inquiry into your personal credit history. With nowhere else to draw from, your potential lender’s due diligence could reach into anywhere you’ve proven (or not proven) yourself as a borrower — personal credit being the most obvious case. Since hard inquiries are known to put a small dent in your credit score, expect a small dip on your next credit report. Holding all other things constant, your score should get back to where it was within six months to a year as the inquiry flakes off.

You’ve likely signed a personal guarantee

For small businesses, most business card providers will make you sign a personal guarantee, which is roughly equitable to co-signing… for yourself. Essentially, a personal guarantee promises that if you fail to pay your debts on your business card (or as a business writ large), you, as an individual are still on the hook. That gives your lender the right to go after your personal assets — all credit lines included.

Nearly all small business credit card agreements have some personal guarantee written into them, so in the eyes of the law, your personal credit will always have a tie to your business credit. As time goes on and your business builds a credit history of its own, your personal credit may diminish in importance — but the guarantee still remains.

Here’s why your credit is indivisible

First and foremost — from a behavioral standpoint, a line of business credit won’t absolve you of any less-than-perfect history with your personal card(s). Your spending habits are your spending habits. If you’re having trouble staying within your limits, paying your balances, or shaving down your debts, you’ll want to think long and hard before opening up a business account.

It’s the same you, whether your card has “business” in the name or not. If your credit score is in jeopardy, a business card could only compound matters by providing the temptation you’d be better off avoiding.

Editorial disclosure: All reviews are prepared by staff. Opinions expressed therein are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including card rates and fees, presented in the review is accurate as of the date of the review. Check the data at the top of this page and the bank’s website for the most current information.