Business credit will show up on your consumer credit profile if the creditor or lender reports that activity to the personal credit bureaus.
Many small creditors require you, as the business owner, to personally guarantee their debt. That means that you’ll have to pay the entire loan amount if your firm cannot pay it off. Depending on your creditor’s policy, it might also mean that your business credit activity could run over onto your personal credit report. Some creditors report all activity, whether positive or negative, to your personal credit reports. Others only report it if you default on any of your loan products.
Is It Better or Worse if Business Creditors Report Activity to Your Personal Profile?
Whether or not business creditors report your activity to your consumer profile depends on your situation and how you use your credit.
Cons of Business Credit on Your Personal Credit Profile
If you are purchasing big-ticket items with your business line of credit or racking up rewards by charging everything to your card, your personal credit may take a hit.
This is because scoring models used by Experian, Equifax, TransUnion, and FICO consider your credit utilization rate, or debt usage. This percentage compares your reported credit balances against the credit limits still available — often using an individual loan or credit amount, as well as all your credit accounts totaled together.
A high business credit balance that appears on your personal credit can indicate a high credit ratio which could drop your credit score.
When choosing a business credit card, you may want to avoid ones that do not report your activity to personal credit in certain circumstances.
For instance, sometimes you may have to run up charges that put you near the limit or carry a balance for multiple months. Circumstances that cause this could include buying inventory for your busy season, or airfare and travel expenses to attend a tradeshow. A charge too many like that can lower your personal credit score.
Pros of Business Credit on Your Personal Credit Profile
Conversely, if you avoid high balances and pay your debt obligations on time, having business credit appear on your personal credit report may help your credit score. This is especially true if your credit profile is somewhat thin.
If you don’t use credit cards and avoid business debt, utilizing credit from a company that reports your complete account activity may boost your credit profile.
How Business Credit Can Help My Personal Credit
Having lines of credit, loans, and business credit cards that do not report to your personal credit profile can help your business and personal credit ratings.
In the same way that negative credit reporting can hurt your credit score, positive reporting can improve it when you:
- Ensure you pay off your business expenses at the same time as your personal purchase every month. This will improve your credit utilization ratio and add to your total available credit.
- Make your payments on time, which can lead to a healthy score. Decent payment history makes up to 35% of your FICO score.
- Decide you no longer want your business card being reported to your consumer profile, and you choose to leave it open. The length of your credit history makes up 15% of your score, and doing this will ensure the average age of your accounts remains as high as possible.
Business Credit that May Show Up on Personal Credit Reports
Here are examples of card issuers and whether or not they report all credit activity, or only negative or default activity:
- American Express — No (they don’t report all activity), yes (they report negative or default activity)
- Wells Fargo — No, no. Wells Fargo doesn’t report your negative credit information to your personal profile; however, they maintain the right to do so
- Capital One — Yes, they report some information, though it is marked as “small business” on your personal credit report. Also, Spark Cash customers are no longer reported to the consumer credit bureaus as long as your account stays in good standing
- US Bank — No, no
- PNC — No, no
- Discover — Yes, yes
- CitiBusiness — No, no
- Chase — No, yes
- Bank of America — No, no
Be sure to read your business card issuer’s terms and conditions for the latest information.
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