How Do the Credit Reporting Policies of Personal and Business Credit Cards Differ?

If you plan to open a credit card account to help cover company expenses or earn rewards, you have plenty of options. Depending on how you plan to use it, you may find that it makes more sense to use a personal credit card than a business card. 

One of the ways personal and business credit cards differ is in how they each impact your credit score. Consumer card companies typically report your activity to the major credit bureaus, so their accounts will impact your personal credit rating. A good thing if you pay on time; though, it could damage your score if your account becomes delinquent.

On the other hand, business credit card issuers don’t always send data to the reporting agencies — or they only report when your payment is late. Continual late payments usually hurt your consumer and business scores, especially if you signed a personal guarantee. 

How Does Credit Reporting Work?

Each time you apply for a credit card, open a new account or make a payment on an existing account, your card issuer reports this activity to the credit bureaus. Information given to these agencies goes onto your credit report. This raises or lowers your credit score, affecting your ability to secure personal loans or business funding down the road.

Your business and personal credit data are not linked. The reporting and scoring for each are handled separately by different agencies, utilizing differing criteria. Business card issuers can report to either business or consumer reporting agencies, while consumer credit issuers report exclusively to consumer credit bureaus.

Business Credit Bureaus

Three main commercial credit bureaus collect data, create reports, and calculate business credit scores representing your company’s health, stability, and creditworthiness. 

  • Dun & Bradstreet (D&B) — Uses the PAYDEX system to calculate a score ranging between 0-100, plus other indicators like a Delinquency Predictor score.
  • Equifax Business — Offers the business credit risk and the business failure scores to predict your company’s ability to pay back debts.
  • Experian Business — Tabulates a 100-point business score, plus a Financial Stability Risk Rating between one and five.

If you signed a personal guarantee pledging to pay the debt if your business can’t, your business card issuer might also report account activity to consumer credit agencies.

The three consumer credit bureaus — Equifax, Experian, and Transunion — collect information and create personal credit reports based on your financial stability as an individual, apart from your business. Each of these three credit reporting agencies uses two different scoring models to develop consumer credit scores ranging from 300-850. 

  • The FICO scoring model has been around since the 1950s, and it is the score most widely used by banks and mortgage companies. 
  • The VantageScore is a more “consumer-friendly” scoring system that originated in 2006. It weighs data differently than the FICO score — with slightly more weight on prompt payments and length of credit history and less emphasis on current balances and recent credit applications.

Why Is a Personal Credit Card Better?

Business cards typically report to consumer credit bureaus only when you miss a payment; therefore, they have the potential to hurt your score more than help it. On the other hand, with a personal credit card, your consumer credit score gets a boost with on-time payments to your business account.

Additionally, business credit profiles do not have the same privacy protections as consumer credit reports. If you have a business card that reports to the commercial credit bureaus, your information will be available to anyone willing to pay for a copy of your report. Personal credit card issuers only report to consumer credit bureaus. A third party can only view these reports under specific circumstances.

What Are the Advantages of a Business Card?

Consumer card issuers will not report to commercial bureaus under any circumstances, so a business card might be a better choice if building business credit is essential to you. Strong business credit will eventually allow you to take out loans in your company’s name only, without needing to provide a personal guarantee. 

Without a personal guarantee, your company’s credit card account is not tied to your personal finances. This means your private assets are protected from collectors or judgments against your business. If your company owes money on a delinquent business credit card, the courts will not be able to order the liquidation of your assets to cover that debt. 

Plus, when you apply for a business card without a personal guarantee, there will be no hard inquiry on your consumer credit report. Too many hard inquiries are a red flag to potential lenders and could drag down your score temporarily.

The Revenued Business Card Alternative

Business and personal credit card companies have different reporting policies, so take the time to weigh your options and choose the right one for your needs. However, there is one thing most credit cards have in common — like a traditional business loan or line of credit, applicants will need to have excellent credit to qualify.

What if you have poor credit but still need financing to help pay for business expenses like office supplies, utilities, and inventory? With no minimum credit score requirements, the Revenued Card is the solution you’re looking for. Call us at +1 (877) 662-3489to find out more.

We're working on some pretty cool new pieces of content, including tools that will give you insight into your business finances.

Want to be the first to know when they launch?

What Business-Specific Benefits Do Business Cards Offer?

Business credit cards offer numerous special benefits geared toward the entrepreneur. These include programs that give you points or cash-back rewards for common business expenses, travel perks that make life easier during company-related trips, higher credit limits, and more. Like a typical personal credit card, a business card provides you with a pre-approved funding source […]

M&T Bank Review for Small Business 2021

M&T Bank Small Business Banking With the broad range of banking services in the market today, it’s hard to find a one-size-fits-all option for small business. M&T Bank claims to offer a unique banking experience customized to the needs of your small business, but what would that really mean for you? Here’s a rundown of […]