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Can a business credit card affect my personal credit?
Here's how you can protect your personal credit score if your provider reports your business spending to the credit bureaus.
A business credit card can increase your working capital and keep your business expenses off your personal cards, but you usually can’t fully separate your personal finances from your business finances. Many providers consider your personal credit score to determine the credit limit for your business card. Additionally, most small business credit cards require a personal guarantee where you agree to be on the hook personally if your small business can’t pay.
When you’ve got a business credit card, you could inadvertently hurt your personal score if your business falls behind on payments. Learn more below.
Can a business credit card affect my personal credit score?
Yes, your personal credit score could be affected in these 3 ways:
- Hard pulls on your credit report. When crunching your credit score, the credit bureaus look at factors that include your payment history, credit utilization ratio, overall history, the types of credit you carry and recent credit inquiries. A business credit card — or any type of new card — can affect these factors, starting with your application. When you apply for your business credit card, providers will usually run a hard inquiry on your personal credit, which can temporarily lower your personal credit score.
- Personal guarantees. Most business cards also require a personal guarantee when you apply. This agreement permits the provider to pursue payments from your personal accounts if your company isn’t able to meet its obligations. If you can’t pay from your personal savings, your personal credit score could be affected. Personal liability is typically stated in your cards terms and conditions as “Joint and Several Liability”.
- Business credit card activity reported. The provider might report your business card’s activity to the personal credit bureaus. Some won’t, but if yours does, it’s possible for large business card balances to be factored into your personal credit utilization ratio, affecting your score. Late or missed payments on your business credit card could also be reported on your personal credit report, damaging your credit score too.
Which credit bureaus do business card providers report to?
Since most small business credit card providers require that you personally guarantee your small business card, they could potentially report to both the personal and business credit bureaus. Most providers will only report to the business bureaus, but the provider may report to the personal bureau if your business fails to pay and they have to go after your personal finances to cover the balance of the business card.
| Bank or credit card provider | Reports to? |
|---|---|
| American Express | May report to both business and personal bureaus |
| BMO | May report to both business and personal bureaus |
| CIBC | May report to both business and personal bureaus |
| RBC | May report to both business and personal bureaus |
| Scotiabank | May report to both business and personal bureaus |
| TD | May report to both business and personal bureaus |
Will a business credit card with no personal guarantee protect my personal credit?
Even without a personal guarantee, your business credit card can affect your personal credit score — at least initially. Most business card providers pull a hard inquiry on your personal credit, which can temporarily lower your personal score.
That said, most small business credit cards in Canada require that you personally guarantee to pay off any unpaid balances on your business card. However, if you have a large business or a corporation, this will likely not be the case.
3 tips to protect your personal credit score from a business credit card
Healthy credit comes with monitoring your finances, which is always important when you’re running a business. If your business makes late or missed payments, it might not just be your business credit score that takes a hit — your personal score could too.
- Pay on time. Most credit card providers report delinquencies or negative information to the two credit bureaus – Equifax and TransUnion – even if those payments are for business purchases.
- Stay under your credit limit. Spending conservatively and even paying your bill in full can keep your credit utilization ratio low, making it easier to qualify for other credit cards or business loans, should you need them.
- Keep your business spending separate. Draw a line between your personal and business finances and build a stronger business credit score by using your card for business expenses only.
Do I need a business card that won’t affect my personal credit?
If you’re worried about potential hiccups with your business credit card, you can look into cards that won’t report to the personal credit bureaus. But serious delinquencies — late payments of 60 days or more, defaulting on your account or reports to collections — may end up on your personal credit report regardless.
If you’re confident in your business’s financial health, instead focus on weighing business credit cards that can best benefit and maximize your business spending, whether with a low interest rate, a balance transfer promotion or accelerated rewards.
Business credit card comparison
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Bottom line
For most business owners, the need for a business credit card can be a sign that you’ve made it — your company is robust enough to need separating from your personal spending, and you can take advantage of rewards designed for your business’ spending habits.
Still, your business activity could negatively affect your personal credit score without knowing the terms you’ve agreed to – especially since most small business cards in Canada require you to be personally liable. Minimize any risk to your personal credit by managing your business spending carefully, and contact the provider to ask if they report to both the personal and business credit bureaus.
To find a card that best suits your unique business needs, read our comprehensive guide to business cards.
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