About Business Credit Cards

As more and more banks place restrictions on personal credit card applications, many people are starting to consider applying for business credit cards to get more welcome bonuses. In our business credit card introduction, we briefly describe the basic steps and things to keep in mind when applying for a business card

Similarly, some business credit cards offer great value while others are pretty bad, so we still recommend starting with the high-value cards first. Skip the cards that aren’t worth it, since applying for a business card is more hassle than applying for a personal card.

That said, many people still have questions about business credit cards, especially concerns that applying for a business card might hurt their personal credit score and affect future auto loans, mortgages, and so on. In this article, we’ll talk about how business credit cards affect your personal credit score and credit report.

Will Applying for a Business Credit Card Affect Personal Credit?

We know that when you apply for a personal credit card, the bank will pull your credit report, resulting in a Hard Pull. This Hard Pull is an inquiry record, and it usually causes your credit score to drop by 3-5 points in the short term. When applying for a business credit card, in addition to providing the company’s EIN, you also need to provide your SSN. For example, when applying for a Chase credit card, on the personal information page you’ll need to enter your SSN or ITIN in addition to your name and address.

After you click the apply button, the card issuer will also pull your personal credit report. You may wonder why a business credit card would need your personal credit report. This is really a risk-control measure. The issuer may consider that if your business fails or even goes bankrupt, they may require you to repay the debt personally, so having a good personal report helps when applying for a business credit card. If there isn’t enough information on your business credit report, using your personal report as a reference is also an effective way to evaluate you.

According to online DPs, most banks such as AMEX, Chase, Citi, Barclays, and Wells Fargo will Hard Pull your personal credit report when you apply for a business credit card. Brex may be the only one that does not Hard Pull.

However, if the only thing on your report is a Hard Pull, it actually stops affecting your score after 2-3 months, since Hard Pulls are only a short-term factor. So if you don’t need to apply for a mortgage or personal loan in the next 2-3 months, applying for a business credit card will have a basically negligible effect on your credit score and report. If you do need to apply, then it’s best not to apply for either personal or business cards, because loan underwriters will need to explain any Chase Hard Pulls, and it would be bad if it affects your rate.

Also, some business credit applications only pull one credit bureau, some pull two, and some pull all three. If your report from a certain bureau is not pulled, then that bureau’s score will not be affected either.

Hard Pull

Will Business Credit Card Activity Show Up on Your Personal Credit Report?

We know that Hard Pulls from personal credit cards will appear on your credit report, and once you have the card, monthly payment and balance information will also be recorded on the report. Business cards are different. New accounts and activity on business credit cards usually are not reported on your personal credit report. But there are exceptions: some card issuers will report a Hard Pull period if there is a problem with your business credit card. According to online summaries, the rules are as follows:

  • American Express: Only negative activity is reported
  • Bank of America: Not reported
  • Capital One: Reported. Capital One Spark Cash Plus and Venture X Business cards are only reported if the account has problems (such as delinquency)
  • Chase: Only reported in cases of serious delinquency or bankruptcy
  • Citi: Not reported
  • US Bank: Only reported in cases of serious delinquency
  • Wells Fargo: Not reported

From a credit score perspective, if business account activity does not appear on your personal Hard Pulls, then of course your score will not be affected. In other words, aside from Capital One, most banks will not show anything on your personal credit report as long as you use the business credit card normally and pay on time, and it won’t affect your score. So you also don’t need to worry about whether a high business card balance will have any impact on your personal credit accounts.

For Capital One, when your application is approved, a new card will appear on your personal credit report, which will lower your score a bit. After that, all balances and payment activity will appear on your personal credit report as well. So the impact on your credit score should be the same as with a personal card. Therefore, if you have a Capital One business card, we recommend not carrying too high a balance and paying it off on time every month. Of course, there’s a tradeoff: if you use their card well, your personal credit score may also go up because of it.

One more point: many business credit cards allow you to add employee cards. Employees can use these cards for business-related company expenses. These employee cards generally do not show up on the employee cardholder’s personal credit report, and if any debt occurs, it is reported on the primary cardholder’s personal credit report.

Impact on Our Applications

Most of the time, business credit card applications are parallel to personal card applications and basically do not affect each other; welcome bonuses are also earned separately.

But let’s mention Chase’s 5/24 rule here. 5/24 means no more than 5 new credit card accounts in 24 months. If you happen to apply for a Capital One business credit card, because the new card appears on your personal credit report, it will count as one of your 5/24 slots. For other banks, since the new card does not appear on your personal credit report, Chase has no way of knowing whether you have a new card, so it won’t count toward 5/24. A classic use case is when someone is already over 5/24 (that is, they have not exceeded 5 new cards within 24 months), they should first apply for a Chase business credit card; Capital One will not get blocked by 5/24 again.

Conclusion

To sum up, applying for a business credit card will temporarily affect your personal credit score and may cause it to drop by 3-5 points. The vast majority of business credit cards do not affect your personal credit score during normal use. Below is a very detailed chart summarized by TPG, so I won’t go into it further.

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