August 12, 2022

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Credit scores can be complicated to understand, and there are also lots of misconceptions about how they’re calculated, and what can impact credit scores. In particular, there’s often confusion about what impact business credit cards have on personal credit scores, so I wanted to address that in this post.

Why should you consider a business credit card?

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

  • There are lots of great business credit cards out there, offering huge welcome bonuses, a great return on everyday spending, and valuable perks
  • If you have a business, it’s useful to be able to separate personal and business expenses, in order to stay organized; while you can technically put business purchases on a personal card and then have the business reimburse you, it seems easier to just keep things simple
  • So many people have side hustles nowadays, and even a sole proprietorship could make you eligible for a business credit card

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

Do business card applications count as an inquiry on personal credit report?

Yes, they do. When you apply for a business or personal card, there’s a credit inquiry on your personal report. This can temporarily lower your credit score by a few points, which isn’t a big deal. The inquiry generally falls off your credit report after 24 months.

So while there’s a mild negative impact to your score from applying for a card, other metrics of your credit score can improve as a result of having more cards. For the purposes of a credit inquiry, there’s no difference between a personal and business card — a hard pull has the same impact regardless of which type of credit card it’s from.

As someone who takes my credit score seriously (and who has a nearly perfect credit score), losing a few points from inquiries is one thing I put almost no thought into, because the impact is inconsequential for those with excellent credit.

Do business cards otherwise show on personal credit report?

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

Does good credit “behavior” on business cards help your personal credit score? Generally not:

  • Most card issuers don’t report on-time payments or your credit utilization from business cards to your personal credit report
  • Some card issuers do report business cards becoming delinquent to your personal credit report

This is 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 utilization or missing a single on-time payment on your business card. At the same time, you don’t get the upside of good credit behavior.

What about the Chase 5/24 rule?

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

With that in mind:

  • Chase business cards are subjected to the 5/24 rule, which is to say that you won’t be approved for Chase business cards if five or more new cards show on your personal credit report in the past 24 months
  • That being said, most business cards don’t count toward that five card limit; that’s because they don’t show on your personal credit report in the same way as personal credit cards
  • Generally you can expect that business cards from American Express, Chase, and Citi, won’t be considered toward the 5/24 limit
  • In other words, if you’ve opened four new accounts in the past 24 months and then apply for a Chase business card, you’ll still be at four cards

Bottom line

Some people are confused by how business cards impact your personal credit score. When you apply for a business credit card there’s generally going to be a pull of your personal credit, so your score may temporarily go down a few points.

In the long run your business card activity shouldn’t show on your personal credit report, unless you become delinquent. So you don’t have to be as worried about credit utilization on a business card as on a personal card.

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

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