One of the first rules of business accounting is to keep all your personal bank and credit cards separate from the ones for your company. Mixing the two can lead to confusion about business revenue vs. personal wages, as well as errors in separating personal from business expenses. However, can your business credit cards impact your personal credit?
Mixing Business with Personal Credit Reports
Small business owners are finding that their business credit card activity is being reported on their personal credit reports. Particularly, credit card behemoth, Capital One, is the major culprit.
Capital One has confirmed that their practice is indeed to report all business card activity on personal credit accounts, although this is not the industry standard. Other credit card issuers such as JP Morgan Chase and American Express confirm that they do not report business card activity unless the account is in default.
The other question many small business owners have is whether this practice is legal. Yes, it is. When you provide your personal credit card number on a business card application, you give the issuer permission to check your credit and report business credit to your personal history.
How Your Corporate Finances Impact Your Personal Credit
How does business credit activity affect your personal credit? Even if you manage your business cards well by paying on time and keeping below the credit limit, your personal credit can look overextended. If you wanted to apply for a loan, but a lender found a high level of corporate debt without the personal income to cover it, you could be denied a loan. In addition, your personal credit score could drop with the additional activity.
Therefore, as a small business owner, you must remember that your company’s financial activity could show up on your credit. If you wish to avoid this, then step one is to stay away from credit cards issued by Capital One. Step two is to manage your business cards with care to avoid any late payments being published to your credit report.
