Credit Scores: Why Some Business Cards Impact Your Credit Score Less Than Personal Cards

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Additional Reading:

I’ve explained the impact of applying & cancelling personal credit cards on your credit score.  In those posts, I mentioned that business credit cards (from Citi, Chase, and American Express) don’t impact your personal credit score as much as personal cards, but let’s take a closer look.

In general, you don’t need to have an established business or a partnership or LLC to get approved for a business card.  You can usually get approved for a business which you run as the sole owner.  Or even businesses which you are thinking of starting or which you recently started.  But you shouldn’t lie on the business card application form.

 How Is Your Credit Score Calculated?

According to the FICO website, your credit score is determined by:

  • 35% Payment History — (Do you pay on time?)
  • 30% Amounts Owed –  (Do you use a lot or little credit?)
  • 15% Length of Credit History — (How long have you had credit?)
  • 10% New Credit — (Have you applied for credit recently?)
  • 10% Types of Credit — (Do you have different credit types?)
Fico Score Calculation (Image from MyFico.com)

Fico Score Calculation (Image from MyFico.com)

Why Business Cards Impact Your Credit Score Less Than Personal Cards

The main reason why business cards impact your personal credit score less than personal cards is because the credit line and spending on a business card from some banks are usually NOT reported to the personal credit bureaus (provided you don’t default on the loan).

Do note that Capital One does report business cards to credit bureaus, and Bank of America, Barclays, and US Bank could also do that.

Instead, the only impact to your credit score is the credit inquiry.  Each time you apply for a credit card, the banks look at your credit report and that is called a credit inquiry.

Impact of Applying for Business Credit CArds

1.   Length of Credit History (15%) – No Impact

Applying for a personal credit card will decrease the average age of your credit accounts, which will decrease your score.

But since a business credit card is not reported to the personal credit bureau, applying for a business card will not reduce the average age of your credit accounts.

2.   Amounts Owed (30%) – No Impact

The amount you spend on a business credit card, as well as your credit line, is not reported to the personal credit bureaus and doesn’t impact your credit utilization ratio.  This means that you could (theoretically) use your entire credit limit on a business credit card and it would have no impact to your personal credit score.

In contrast, using your entire credit limit on a personal credit card will usually reduce your score severely, even if you pay the balance in full once your statement closes.

The flip side of this is that since your credit lines aren’t reported to the credit bureaus, you won’t see a lift in your credit score for not utilizing all the credit which you have available to you i.e. a lower utilization ratio.  But I like the option of charging large amounts to my business cards and not having them impact my personal credit score.

3.   New Credit (10%) – Decrease 

Each time you apply for a credit card, the banks look at your credit report (sometimes from more than 1 credit bureau).  This is called a “hard inquiry” and stays on your credit report for 2 years.  According to MyFico, in addition to impacting your credit score, lots of hard inquiries also suggest that you are a riskier borrower to banks.

But no one knows for sure the exact impact of credit inquires on your credit score, since the algorithm which calculates credit scores is a secret.  But folks speculate that an 18 month old inquiry has less impact to your credit score than an inquiry only 1 month old.

The credit inquiry when you apply for a new business card is reported to the personal credit bureaus and this is the only impact to your personal credit score from a business card application.

Bottom Line

Not only do business credit cards let you get more sign-up bonuses, they also have less of an impact to your personal credit score if they are Citi, Chase, or Bank of America business cards.

You don’t need an established business to get approved for a business credit card and can often get approved for existing businesses which you run as the sole owner or which you are thinking of starting.

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These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

52 Responses to Credit Scores: Why Some Business Cards Impact Your Credit Score Less Than Personal Cards

  1. I noticed that even after the changes in the past few years, becoming an authorized user of someone who has a great credit history still improves your credit history as well (although not as much as it used to). Because business cards are not reported to the credit bureaus, do you think becoming an authorized user of someone’s business credit card account will have zero positive benefits?

  2. business cards are the ones they will get you FRed or all accounts including personals get closed with them.

    not for 90% of the people who visit this site they don’t have legit business.

  3. It’s probably also worth pointing out that if you are already applying for a personal card, getting a business card on the same day has NO impact on your credit score with certain banks… applying on a different day does have an impact.

    With Chase, if you apply for personal and business on the same day, they do ONE credit inquiry overall. If you are approved for a business line, the credit line is not reported to your credit report so has no impact at all, as you pointed out, Daraius. As a result, if you’re applying for personal already with Chase, there is no negative risk of also putting in a business app :)

    Citi can do two credit inquiries on different reports – one for each card (though this may vary by location). Perhaps you know how Amex handles this, Daraius.

  4. @WeddingSpend – also wanted to note that different banks handle authorized users differently. Chase, for example, does not take the social security number for any authorized user and does not report the account to the credit report of the authorized user, business or personal. It just sends an extra card.

  5. I know the big 3 (citi, chase, and amex) don’t report the business cards but don’t some banks report them such as Capital One and maybe Bank of America?

  6. If the business is a sole proprietorship (using the owners SS instead of Tax ID) does that have any impact on how it reports to the credit bureau?

  7. I would like to get the SWA bus. card today, but got the per. SWA card 1/1 and Usair card 2/1o. Do I need to wait to apply? Your advice is appreciated as always, D. Thanks Bill.

  8. @bill – I applied and was approved for the Chase SW 50K Premier Business, the 50K Premier Personal AND the 35K Barclays US Air cards, all three on the same day last week!

  9. Good post.. I run all my big expenses on my AMEX SPG Business card or Chase INK card to lower my utilization rates.

  10. @Wedding Spend – If the authorized user is not reported to the credit bureau, it likely will have no impact on the credit score.

    @jim - I’ve written previously that the AMEX business Gold card may attract scrutiny for heavy spending, but I’ve been fine using other business cards.

    @The Miles Professor – Sometimes calling reconsideration results in a different credit pull as well as if the card is approved on a different day. In general, I expect to see 2 credit pulls, but am happy when (sometimes) it is only one!

    @scott – You always have to enter in your social security number on the application in addition to your Tax ID. Citi, AMEX, and Chase don’t report business cards to the credit bureaus unless you default on the loan.

    @Samuel – I believe Capital One will report a business card to a personal credit bureau, but the main miles and points banks do not. It is possible that US Bank and BOA also report to a personal credit bureau.

    @bill – you could apply, but will almost certainly need to call the reconsideration line. Good luck!

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  13. I’ve been looking into applying for the Chase Sapphire Preferred, since Chase only does one inquiry for personal and business cards on the same day, would it be best if I also applied for the Ink card as well?

    Thanks
    Austin

  14. @Austin A. – I wouldn’t count on one inquiry, but great news if it does happen. Only you can decide whether to apply for the Ink or not. I usually do one personal and 1 business card from Chase and sometimes, I just stick to one card.

  15. Good post! I’m getting ready to do my first foray into the world of getting miles through CC sign-ups. I’ve decided that the most I’m comfortable doing at once is 5 (maybe even just 4). Would you say that it would lessen the blow to my credit score more if a couple of these are business cards, instead of 4-5 personal cards, because the biz cards wouldn’t count towards average age?

  16. @Miles Professor,
    Incorrect in my case. I’m an AU on two of my wife’s Chase cards, and they are on my CRs.

  17. I had my wife add me as an AU to her JC Penney & Macy’s cards opened in 1984/1985. My average of accounts increased alot and adding those cards kept my credit scores from dropping too much when I applied for many CC’s (12+), refinanced 3 rental houses (summer/fall 2012) plus paid off 2 older mortgages when I sold one of my rentals.

    Bottom line: Adding a spouse as an AU (with same address) on ancients cards will increase the credit scores (FICO’s) but not as much as a few years ago.

  18. @ZJ, Thanks for the info. If you don’t mind, which card is this and how long ago? I’ve been adding people to all my new cards recently and my parents have been adding each other and haven’t been asked for any SS#.

  19. @Kristen - If this is your first time, you could even start slower with perhaps 1 or 2 cards and see the impact for yourself. Business cards wouldn’t impact your score as much as personal cards because the credit line is usually not reported and it doesn’t affect the average age of accounts. But getting a business card if you’re new to credit cards could be harder than getting a personal card.

    @ZJ @The Miles Professor - Some banks like Chase have a knack of figuring out the additional user’s social security number (even if you didn’t provide it) and adding the card on the authorized user’s account.

    @chemist661 - I believe the credit bureaus changed the algorithm so the impact of authorized users isn’t as great as it used to be. Lots of folks were “gaming” their credit score by adding authorized users.

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  23. I just confirmed with Chase that if you apply for a business and personal credit card (even within the same hour), you will inquire 2 separate credit checks… So don’t believe what the other guy said. Both the banker and the Chase credit card dept that he called to confirm this said this. I’m glad I took time to check this myself, instead of taking another person’s word for it.

  24. @David – That is usually the case because they are managed by different units within the bank.

  25. Yes, I applied for the Chase Priority Club Visa and Ink yesterday thinking it would be one inquiry, but to my dismay, not only did I get two inquiries on Experian but they denied the Priority Club because I had “too many recent inquiries,” which the representative explained was solely due to the fact that I had applied for two cards in one day. Fortunately, I explained to him that one card was for personal use and one was for business (which should have been obvious, but he said “oh”), so he offered to do a re-review on the Priority Club visa. During the re-review, he moved some credit from my Chase Marriott card and approved the Priority Club, thankfully. He said I would have to call on Monday to see about the Chase Ink because it is a different unit.

    Morale: don’t believe the single inquiry lie!

  26. this is my foray into the world of cc perks. I have two questions?

    1. I plan on getting an auto loan in the next 6 months. Should I hold off on getting a personal card or just get a business card (we have a well established business with credit history)
    2. If I do get a card, do I apply for a business card first and then how long do I wait to apply for a personal?

    I was interested in the sw cards and the chase cards as an intro but, I like the amex plum card for the cash back as well.
    Thank you so much for a great website. I didn’t realize what I was getting into until I started doing some research and fell down this rabbit hole. The world of cc rewards is very complicated and hats off to the people who can travel around the world on it.

  27. @Jason - That’s true. Business and personal cards are often 2 credit inquiries.

    @juanny – 1 or 2 cards, shouldn’t matter, but do what’s comfortable to you! You can usually get 1 business and 1 personal card at the same time. The Southwest companion pass is a nice perk, and currently the sign-up bonus from the Southwest card counts towards the companion pass.

  28. Hi Daraius

    I got approved for the Ink cards recently and Chase is reporting them both to EX and TU. Is this not normal and a glitch? Should I call Chase to see what is going on?

  29. @compddd – The initial inquiry could be reported to more than 1 bureau. I’ve heard of it happening to a few other readers as well.

  30. Sorry I should have been more clear. I wasn’t talking about the inquiries, the Bold and Plus are showing up as new accounts, credit lines and all under my EX, TU, EQ and I pulled my credit report for all three to verify this.

    This is the first time I’ve seen this happen with a Chase business card. It’s happening to other people from FT as well. Any ideas?

  31. @compddd - Very interesting. I know that banks are tightening up on controls for business cards.

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  37. I own two separate businesses that I run as sole-proprietorships (no EINs, just the same SSN). I have the Ink Plus and Ink Bold on one of the businesses. I haven’t applied for any cards for the 2nd business but would also like to get the Ink Plus and/or Bold for that business. Wondering if Chase would say no because both businesses are under the same SSN and consider me already owning that product.

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  42. Thanks for all your useful info. I recently got the SW companion pass and currently have the Chase personal Plus, personal Premiere, and Business card open. Taking into account the annual fee of each, and bonus points earned annually for keeping it open, which one would you recommend keeping? I want to continue earning SW points but minimize the annual fee, maximize the bonus points/perks, and minimize impact to my high credit score rating. The credit limits on each card are: plus $5K, premiere $25K, business $12K. Your recommendation on which 2 cards to close out is appreciated. Thanks!

  43. @wsmworld – If you have the business premier, I’d keep that because of no foreign transaction fees and because the spending doesn’t show on your personal credit report (unless you default).

  44. Thanks for posting all this useful info! I really want to apply for the Chase Ink Bold while it’s still at the higher sign up bonus, but I will be applying for a mortgage next year. Do you think it’s wise to apply for the business cc?

  45. @Jen L – One card shouldn’t matter, but do what you’re comfortable with!

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  47. Applied for Amex Business Blue and received notice I was approved and would be receiving my new card in 2 to 3 business days by courier. I noted to send statements to office address, so is this also where they will also send the new card? No one is at the home address during the day, thus no one would be available at home for a courier to deliver to, but would be at the office?

  48. @MikeD – That should be where they send the card.

  49. If I carry a balance on a Chase Ink Cash Rewards card (with the 0% APR for 1 year intro offer) will that be considered missing a payment, and thusly affect my personal credit because it will be reported?

  50. @Joe – Not as long as you make your minimum payments.

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