Business Credit Cards May Hurt Personal Credit Scores

Oct 22, 2018

Though you may think that your business and personal credit scores do not cross paths, think again.
Since almost all business credit cards do not require collateral, they require you to sign personal guarantee agreements. Agreeing to these terms mean you and your business are liable for any balances, therefore, they can impact your personal credit scores. In fact, if you stop paying on the card or get behind on payments, the credit card issuer can go after your personal assets to recover costs.

Card Type Matters, Choose Wisely

If you are worried about how a business credit card make impact your overall credit history, apply for a corporate credit card instead of a small business card if possible. However, be mindful that not all merchants will be approved. Corporate credit cards often are issued to larger businesses with annual revenue of at least $4 million and you should be prepared to provide financial information to back it up.

How Exactly Do Business Credit Cards Impact Personal Credit?

The minute you apply for a business credit card, your personal credit is impacted. Credit card issuers will use your Social Security number to ensure that you have good personal credit before you get approved for business credit. Any hard credit inquiry will negatively impact your credit score, but it is only temporarily and only trims your score by a point or two.

The number of times a credit card issuer reports business credit card activity can affect your personal credits. Some cards report all activity and others only do so when a business account becomes delinquent.

This is how some of the most popular credit card companies report business card activity:

  • American Express, Bank of America, and Chase only reports to the consumer credit bureaus if your account is not in good standing or delinquent.
  • Capital One and Discover report all business credit card activity to the consumer credit bureaus.
  • Citi, U.S. Bank, and Wells Fargo do not report business credit card activity to the consumer credit bureaus.

If you want to find how and when a credit card company reports account activity, contact the credit card issuer directly and ask about their standards.

The Greatest Impact a Card Has on a Credit Report

Maxing out a business card or no longer making payments will have the greatest negative impact your personal credit score. The longer a card goes unpaid, the worse it is for your credit score. That’s because payment history is what influences FICO scores most.

However, if you use it responsibly and pay more than the minimum payments regularly, it could improve your personal credit history.

The Final Say

Before you apply for a business credit card, know its reporting standards, its financial requirements, and your needs. If the card will be used to enhance your overall funding options and not used to rescue an already struggling business situation, a business credit card can help you.

Nevertheless, if you are a merchant that has ruined its credit, there are some high-risk merchant service providers that will still work with you. (EMB) offers a quick, streamlined online application process for obtaining a bad credit merchant account, which will allow you to accept and process credit card payments. EMB specializes in working with high-risk businesses, as well as those that work with businesses that have no credit or poor credit and those that have had merchant account terminated in the past.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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