You may think your slick new company Visa card is your key to the cash casbah, but how you use the card to cover work-related expenses could have serious repercussions on your own credit rating. Some card issuers only report the use of business credit cards to business credit bureaus, not personal ones, so your business Visa may not affect your credit. However, if they do report your card use to your personal credit record, it will only boost your credit score to the extent that you stay on top of payments -- or make sure your company does.
Carte Blanche? Not Quite
As financial ratings publisher Bankrate notes, your business credit card isn't your free-for-all ticket to the good life, compliments of your company. While your company may foot the bill for work-related expenses, it doesn't mean you can spend with impunity. Depending on the credit policy at your firm, you may have to apply either individually or jointly with the company for a business credit card. In either case, the company pays, but it's your credit rating in the crosshairs. If a separate department pays for the expenses on your joint card, you have to make sure those payments are made to keep your own credit in good shape.
Unsecured business credit cards do not report to personal credit bureaus, according to the Small Business Administration. If your goal is to improve your credit through the use of your business card, you want a card that reports your payment activity to your personal credit report. One way to do this is to apply for the business card using your own credit standing. Then add your business's nine-digit Dun and Bradstreet number to the account, which will link it to the business's credit report. You'll build your business's credit and your own at the same time.
Scot-Free or Ball-and-Chain
Perhaps the biggest tipoff for whether the company card will affect your credit is whether your name appears on the card. If the card is specifically linked to you and you've signed a personal guarantee that pulls up your individual credit report in connection with the card, any activity on the card will likely be reflected in your personal report. If you hold a joint account with other employees and do not expunge your name as a cardholder before you leave a company, anything that other account holders do with the card could come back to haunt you.
Boom or Bust
If you thought that opening a business Visa account would juice up your credit rating, think again. You may have greater spending power, but applying for any new card will result in a hard inquiry into your report, which could depress your rating by a small amount. On the other hand, a new credit card with a large credit line could improve your score, as long as the balances on them are no more than 30 percent, says credit monitoring service Privacy Matters, because a higher credit limit improves the debt-to-credit ratio that is a key metric in credit ratings.
- Privacy Matters: How a Business Credit Card Affects Your Personal Credit Report
- Bankrate: How a Corporate Card Can Hurt Your Score
- SBA: Do the Credit Cards for Your Business Report to Your Personal Credit Reports?
- Free Score: How a Corporate Card Can Affect Your Personal Credit Score
- Credit Card Insider: Do Small Business Credit Cards Impact My Personal Credit?
Timothea Xi has been writing business and finance articles since 2013. She has worked as an alternative investment adviser in Miami, specializing in managed futures. Xi has also worked as a stockbroker in New York City.