Do business cards impact personal credit score?

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Credit scores can be complicated to understand, and there are also many misconceptions about how they are calculated and what can affect credit scores. In particular, there is often confusion about the impact of business credit cards on personal credit scores, so I wanted to address that in this article.

Why should you consider a business credit card?

First of all, why is it worth considering getting a business credit card?

  • There are plenty of excellent business credit cards out there, offering huge welcome bonuses, excellent return on daily spending, and valuable perks.
  • If you have a business, it helps to be able to keep personal and business expenses separate, so you can stay organized; although you could technically put business purchases on a personal card and then ask the company to reimburse you, it seems easier to keep it simple
  • So many people have hustles these days, and even a sole proprietorship could make you eligible for a business credit card.

If you don’t have a business card yet, you can’t go wrong with a product like the Ink Business Preferred® Credit Card (test), Blue Business® Plus Credit Card from American Express (test), or Capital One Spark Cash Plus (Review).

Do business card requests count as a personal credit report inquiry?

Yes, they do. When you apply for a business or personal card, there is a credit inquiry on your personal report. This can temporarily lower your credit score by a few points, which is okay. The inquiry generally falls off your credit report after 24 months.

So while applying for a card has a slight negative impact on your score, other measures of your credit score may improve if you have more cards. For the purposes of a credit inquiry, there is no difference between a personal card and a business card – a hard draw has the same impact regardless of the type of credit card it comes from.

As someone who takes my credit score seriously (and has an almost perfect credit score), losing a few points to inquiries is something I almost didn’t think about, because the impact is of no consequence for those who have excellent credit.

Do business cards show up on the personal credit report any other way?

There are all kinds of aspects of your credit report that are positively impacted by having more open cards. 80% of your credit score is your payment history, credit usage, and credit age. So as long as you make payments on time, don’t overuse your credit, and maintain a good credit age, you’re setting yourself up for success.

Does Good Business Card Credit “Behaviour” Help Your Personal Credit Score? Generally not:

  • Most card issuers do not report on-time payments or your business card credit usage to your personal credit report
  • Some card issuers are reporting that business cards are becoming overdue on your personal credit report

It’s both good and bad news, depending on how you look at it. On the plus side, for the purposes of your personal credit report, you don’t really have to worry about credit usage or missing a single on-time payment on your business card. At the same time, you don’t get the benefit of good credit behavior.

What about the Chase 5/24 rule?

Credit card issuers all have different enforcement rules, and one of the best known is the Chase 5/24 rule. This can cause a bit of confusion, especially when it comes to business cards. With Chase’s 5/24 rule, you generally won’t be approved for a Chase credit card if you’ve opened five or more new card accounts in the past 24 months.

In this spirit:

  • Chase business cards are subject to the 5/24 rule, i.e. you will not be approved for Chase business cards if five or more new cards appear on your personal credit report within the past 24 last months.
  • That being said, most business cards don’t count against that five-card limit; that’s because they don’t show up on your personal credit report the way personal credit cards do
  • Generally, you can expect business cards from American Express, Chase, and Citi to not count towards the 5/24 limit.
  • In other words, if you’ve opened four new accounts in the past 24 months and then applied for a Chase business card, you’ll still be down to four cards.

At the end of the line

Some people are confused by the impact business cards have on your personal credit score. When you apply for a business credit card, your personal credit is usually tapped, so your score may temporarily drop a few points.

In the long run, your business card activity should not show up on your personal credit report unless you become a delinquent. So you don’t have to worry about using credit on a business card as much as on a personal card.

What has been your experience with the impact of business cards on your personal credit report?

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