Does a Business Credit Card Affect Personal Credit Score?

Mar 22nd 2024
Does a Business Credit Card Affect Personal Credit Score?

Does a Business Credit Card Affect Personal Credit Score? It's no secret that side hustlers and small company owners prefer to use business credit cards because they make it easier for them to handle their funds effectively and because they help with tax preparation. In fact, some business owners even think it's crucial to keep personal and professional costs apart. But have you ever questioned whether your company credit might affect your credit history or credit score (CIBIL)?

It won't really matter if you keep your personal and business costs separate. Unfortunately, they have a relationship and can have an impact on one another. Few credit card providers submit business credit card accounts to consumer credit agencies, which suggests that how you manage your company credit card might affect your credit score. This is a truth that many individuals are unaware of.

Here, we'll examine how business credit cards may impact your credit, or CIBIL score, and what you can do to effectively manage it.

Does a business credit card impact your personal credit score?

The answer is yes, a company credit card can affect your personal credit. That too as soon as you submit your application for a company credit card. How? The bank will perform a rigorous credit inquiry on your personal credit as soon as you apply for a business credit card. Your credit score may drop a few points with each hard credit draw, which may eventually have an impact on your credit report.

Here are some possible effects of using a business credit card on your credit score and report as a whole.

  • A strong pull

The credit card providers will take into account two things after you have successfully applied for a credit card: the track record of your company and your total credit report. As was already indicated, the lender will perform a hard credit draw on your credit history, which might lower your CIBIL or credit score.

  • Annualized Returns

The calculation of annualised returns is done on an annual basis. But, it is based on the effect of compounding rate of interest. For instance, if you invest a sum of Rs.1 lakh in a mutual fund which has raised to Rs.1.5 lakh in a period of 3 years. The absolute return stands at 50%, but the annualized return is 125 due to the compounding effect.

  • Informing a delinquent account

It's possible that many issuers of business credit cards won't disclose your account activity to the three major credit agencies. However, they could report on your account if you don't make payments, often for much over 30 days. As a result, it may harm your personal credit or CIBIL score, and it remains on your credit record for an extended 7 years. Additionally, it can affect your future capacity to borrow money.

  • Credit utilization

Did you know that certain credit card issuers report all of your credit activity to the three main consumer reporting agencies? You did read that correctly. Even your credit utilisation ratio is included. As a result, carrying a large load on your company credit card might negatively impact your credit score.

The overall credit utilisation on your credit cards should be lower than 30%, according to experts, to maintain your credit ratings sky high. The good news in this situation is that corporate credit cards sometimes have credit limits that are greater than consumer credit cards.

How can you utilise a business credit card while improving your credit?

Let's look at how you might strike a balance between the two now that you are aware of how a company credit card can impact your personal credit score.

  • Monitor your credit rating.

It is essential to check your credit score on a frequent basis. Additionally, it is strongly advised that you check your company credit score in addition to your personal credit score if you have a business credit card. In this manner, you may see exactly where you are with the commercial and consumer credit reporting agencies and try to raise your credit score and report.

  • Make payments on time

This is a no-brainer. Your credit score is heavily influenced by your payment history, so you must be mindful of it. Always be sure to pay off the minimum balance on your credit card, if not the whole amount owing, to raise your CIBIL score. However, paying off the whole balance will save you from having to pay a high interest rate.

  • Avoid bad personal credit practises

As everyone is aware, using a company credit card might affect your personal credit or CIBIL Score. But were you aware of the other viewpoint? Simply put, your business credit may be equally impacted by your personal credit behaviours. It could be challenging for you to receive a company credit card if you have poor credit or a low CIBIL score. Build your credit history accordingly so that banks cannot ever reject your application for a business credit card.

  • Aim to have a little balance each month.

You must maintain low credit utilisation in order to raise your credit score or CIBIL score, thus you must strive to keep your credit card balance low. You can pay in numerous monthly installments or use your credit card less frequently to get there. Additionally, don't worry if your credit utilisation suddenly increases. Once your full debt is paid off, everything returns to normal.

The Conclusion

It's not a terrible idea to apply for a business credit card for your firm, but it's important to understand how business credit cards might impact your credit score and, eventually, your credit report. Practise solid credit practises as well, since doing so will undoubtedly help you improve your credit score and grow your company.


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