Do Business Credit Cards Affect Personal Credit Reddit – Using a small business credit card is one way to build your business credit, but depending on the card issuer, it can also affect your personal credit, especially if you fall behind on payments.
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Do Business Credit Cards Affect Personal Credit Reddit
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Of course, the offers on our platform do not represent all financial products, but our goal is to show you as many great options as possible.
But when it comes to your credit history, it can be difficult to do. A business credit card can help you get business credit, but it can also affect your personal credit.
Here’s what you need to know about your business credit card and how you can use it to help your personal credit, not hurt it.
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Here are three ways applying for and using a business credit card can affect your personal credit.
When you apply for a business credit card, the card issuer may take into account both your business details and your personal credit card details. This may include a strict credit check on your personal loan, which may lower your credit score by a few points.
Many business credit card issuers require you to sign a personal guarantee when you apply. This means that if your company goes bankrupt, you may become personally responsible for repaying the debt.
Your account activity with the three major consumer credit bureaus (TransUnion, Equifax and Experian), including your credit utilization ratio – your balances divided by your credit limit on your credit cards. This means that a large balance on your business credit card can have a negative impact on your personal credit.
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Many credit experts recommend keeping your credit utilization below 30% on all your credit cards. This can be easier with business credit cards, as they may have higher credit limits than consumer credit cards.
However, if you need to make a large investment in your business, it may be better to get a business loan than to put one on the card.
Some of the major corporate credit card issuers may not report your monthly account activity to the three major consumer credit bureaus. But they can report your account if you stop paying.
Late payments are usually reported if you are more than 30 days late. If you reach this point, a negative score can ruin your personal credit history and stay on your reports for up to seven years.
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It’s impossible to say exactly how badly a delinquent account will affect your personal credit. However, since payment history is one of the most important factors in your personal credit score, it can affect your ability to borrow profitably in the future.
Additionally, a late payment can result in a penalty that can be as high as 29.99% for some cards, making it even more difficult to track your payments.
Each credit card issuer has its own policies for business credit cards and your personal credit. We reached out to some of the biggest issuers to ask when they might release your business card details to consumer credit bureaus. Of course, publisher policies can change at any time, so it’s worth checking back periodically for the latest information, but here’s what they told us.
Another important note. The meaning of terms such as “good standing” and “criminal” may vary from issuer to issuer. If you want to know if your credit card company will report your business card activity to the consumer credit bureaus, call to find out their policy.
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You can also check your personal credit reports from Equifax and TransUnion on Credit Karma. For annual reports from all three major consumer credit bureaus, try AnnualCreditReport.com.
It’s always a good idea to call before applying for a business credit card to find out how the card issuer reports. This practice can prevent later surprises that could have negative consequences.
If you’re concerned about the potential impact of a business credit card on your personal credit, there are things you can do to make it a good thing, not a bad one.
The key is to practice the same good credit behavior with a business account as with consumer accounts. Here are just a few.
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Payment history is an important factor in your personal credit score. So if your card issuer reports payment activity, making at least the minimum payment each month can help you improve your score or strengthen your excellent score. And if you want to go even further, you can avoid interest by paying your balance in full and on time each month.
Your credit utilization can affect your personal credit score, so keeping a low balance is a good thing to do. This can be achieved by using the card less often or by making several payments each month. Don’t worry if your usage rate spikes during the month – your results may bounce back once you’ve paid off your balance and your usage rate is back to normal.
Business credit cards can be a great way to pay for operating expenses. However, if you need to finance fixtures or equipment, it may be more difficult to pay it off quickly.
In addition, you may qualify for a lower interest rate through a business loan or other type of financing. Consider all options before choosing.
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While getting a small business credit card for your business may be a good idea, it’s important to understand how it can affect you personally.
In general, practicing good credit habits can help protect yourself and your personal credit, and it can also help your business get credit.
About the Author: Ben Luthi is a freelance personal finance writer and credit card expert. He holds a bachelor’s degree in business administration and economics from Brigham Young University. In addition to Credit Karma, you can also find his wife… Read more.
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