Does Using A Corporate Credit Card Affect My Credit Score?

A corporate credit card is ideal for separating business and personal expenses and rewards you with various offers and perks. However, a corporate credit card affects your credit score. The impact will vary depending on the card type and how you use it. The factors majorly rely on whether you own the account, are an authorised business card user, or are a company employee with a corporate card.

Does A Corporate Card Affect Your Credit Score?

Many overlook that using a company credit card affects your credit score in certain situations. For example, a corporate credit card will impact your credit score if you inquire about opening the account or are listed as the cardholder.

A few other cases include the following.

• If you take out a business credit card in your name, you may risk your credit score since the creditor will likely assess your history and score before approving the loan.
Consequently, the institutions will inform credit bureaus of every credit card transaction. This way, a business credit card is similar to a personal credit card.

• Employees added to their employer's business credit card as authorised users have the same rules. You will have the same credit impact as if you were an authorised user of a credit card belonging to someone else.
As an authorised user, you won't be responsible for making credit card payments, but the account holder's actions may affect your credit. Consequently, if your company has a poor repayment history, does not manage your account responsibly, or carries a big balance month after month, it may affect your credit score negatively.
However, the damage is likely minimal. Some credit reporting agencies do not report unfavourable payment histories or authorised users, while others may.

• The issuer may check your credit history before your company issues you a credit card. However, your company's credit report reflects the activity carried out on your card. Thus, your credit report remains unaffected.

When Using A Corporate Card Helps Your Credit Score

Suppose you are taking a business trip and need to charge hotel, cab, and meal expenses to your credit card. You can drastically increase your credit limit by putting business expenditures on your card and claiming reimbursement from your employer.

However, if your company repays you after a long time, you might incur interest charges. The issuer could report these extra charges to the credit bureaus, which could negatively impact your credit score. The average debt-to-credit ratio should remain below 30%, as recommended by experts.

It is possible to handle a slight short-term reduction in your score if you have lots of credit and no major purchases planned or if you don't plan on applying for a loan anytime soon. You may also earn airline miles or cash back if you charge business expenses to your card.

How Can You Avoid Negative Effects On Your Credit?

Managing a small business credit card responsibly, as you would a personal credit card, is essential if you're the primary account holder. To use a credit card responsibly, you should pay your bills on time and carry minimal debt, if any. Reviewing them every month ensures that no unauthorised charges appear on your statements.

However, if you're an employee and an authorised user of the company's credit card, you can review your credit history to ensure that the card's balance will not impact your credit score. Otherwise, you may request your employer remove you from the authorised user list.

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FAQs

Q1. Do business credit cards reflect on personal credit?
Ans. Yes, there is an impact of business credit on personal credit. You might see your credit score decrease by a few points when you apply for your first business credit card since there is a hard enquiry by the lender.

Q2. What is a Corporate Credit Card?
Ans. Employees of established companies can use corporate credit cards to pay for expenses authorised by their employers—like hotel stays and plane tickets—without using their credit cards.