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How Does Business Credit Card Affect Your Credit Score? 

How Does Business Credit Card Affect Your Credit Score? 

May 31, 2022
5 min read
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How Does Business Credit Card Affect Your Credit Score? 
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It is no secret that small business owners or side hustlers prefer using business credit cards, as it enables them to manage their finances efficiently and further comes in handy when it’s time to do the taxes. In fact, some business owners even believe that keeping your personal expenses and your business separate, is essential. But have you ever wondered if your business credit can impact your personal credit or CIBIL score? 

Keeping your personal and business expenses separate won’t really make a difference. Unfortunately, they are co-related and can influence each other. Many people aren’t aware of the fact that few credit card companies report business credit card accounts to the consumer credit bureaus- which implies that the way you handle your business credit card can lead to a rise or fall in your credit score

Here let’s take a look at how business credit cards can affect your credit or CIBIL score and what can be done to manage it efficiently. 

Does a business credit card impact your personal credit score?

Yes, a business credit card can leave an impact on your personal credit. That too right from the moment when you complete your business credit card application. How? As soon as you apply for a business credit card, the bank will subject your personal credit to a hard credit inquiry. With every hard credit pull, your credit score can lower by a few points ultimately affecting your credit report. 

How do business credit cards affect personal credit or CIBIL score?

Here’s how using a business credit card can impact your overall credit score and report. 

A hard pull

Once you have successfully applied for your credit card, the card issuers will consider two factors- your business’s track record and your overall credit report. As already mentioned, the lender will subject your credit history to a hard credit pull, which can lead to a downfall in your CIBIL or credit score. 

Reporting a delinquent account

Many business credit card issuers may not report your account activity to the three main credit bureaus. However, if you fail to make payments, typically for more than 30 days, they might report on your account. Consequently, it can cause damage to your personal credit or CIBIL score and that stays on your credit report for 7 long years. It may also impact your borrowing ability in the upcoming years. 

Your credit utilization scenario

Did you know that some credit card companies account for all of your credit activity to the three major consumer credit bureaus? Yes, you read that right. And it is even inclusive of your credit utilization ratio. That means a high balance on your business credit card can leave a bad impression on your credit report. 

In order to keep your credit scores soaring high, experts suggest that the combined credit utilization on your credit cards should be below 30%. The good news here is: that business credit cards often tend to come with higher credit limits as compared to consumer credit cards. 

How to use a business credit card while building your personal credit score?

Now that you are aware of how a business credit card can affect your personal credit score, let’s look at how you can create a balance between the two. 

Keep an eye on your credit score

The importance of regularly checking your credit score can’t be emphasized. And if you own a business credit card, it’s highly recommended to check your business credit score alongside your personal credit. This way you can get a clear idea of where you stand with the business and consumer credit bureaus, and work on improving your credit score and report. 

Make timely payments

This one is obvious. Since payment history plays a major role in determining your credit score, you must pay attention to it. If not the entire due, always make sure to clear off the minimum due on your credit card to boost your CIBIL score. Paying off the entire amount can spare you from paying high-interest rates nonetheless. 

Keep your personal credit habits at bay

We all know that your business credit card activity can impact your personal credit or CIBIL Score. But did you know the other side of the story? Simply put, your personal credit habits can equally affect your business credit. If you have a bad credit or CIBIL score, it might get difficult for you to acquire a business credit card. So, build your credit history to such an extent that banks can never reject your business credit card application. 

Aim for a low balance every month

In order to improve your credit or CIBIL score, you need to maintain low credit utilization, which is why you must aim at keeping a low balance on your credit card. To get there, you can use your credit card less often or make multiple monthly payments. Also, if you experience a sudden spike in your credit utilization, fret not. Everything gets back to normal once you’ve paid off your entire balance. 

Key takeaways

Getting a business credit card for your company isn’t a bad idea, but it is essential to educate yourself on how business credit cards can affect your credit score and ultimately your credit report. Additionally, practice good credit habits as that will surely take you a long way in building your credit report and flourishing your business.