A personal credit card that is attached in your name may seem like a pleasant deal, but it's important to realize that it could be having negative effects on your company credit score, whether you have good, poor or stellar credit the both positively and negatively.
The impact on credit of using one of these employee cards will depend on whether you are the authorized cardholder or a business entity, as well as whether it is a small business credit card or a company card.
With this in mind, let's take a look at the nuances you should understand before getting started with business credit cards.Both types of cards have varying rates and fees, annual fees, rewards rates, credit limits and they have varying effects on your credit score.
If you want to check your credit score for you, visit Credible, and make sure that you have not negative effects on it.
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As previously mentioned, the amount of impact that applying a business credit card can have on your FICO score will vary according to your level of responsibility and what kind of card you're using.To this end, let's look at the type of impact you can expect.
Small business cardholder and the impact will be the same as opening up new accounts for personal use.In this case, you can expect hard inquiries on your credit report and for your score to be affected by you or balances and payments.
Authorized - user of a personal business card: In this case, the effects on your credit history may just be the same as being added as an authorized user on a small card.If the primary cardholder makes their payments and pays attention to their credit usage rate, it could actually help your reputation with the Credit Reporting agencies.
Authorized user on corporate credit card: In this instance, being an authorized user on a corporate credit card will have a relatively minimal effect on your credit report if any at all.
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When you're looking at the effects that opening a business card can have on your credit score, it's important to understand the difference between an individual card and a corporate card.A small business card is usually reserved to freelancers or business owners while corporate cards are issued for larger businesses and government entities.
If you are a candidate for a personal credit card, the impact that opening a card will have on your score will be very similar to if you just completed a card application for a small business card.Once you've been approved by a card issuer for a small business card, it can help you build your business through its own credit history, managing cash flow and rewards programs.Examples of such rewards include travel rewards and cash back.
If you are the primary cardholder, you will face a hard inquiry upon paying his/her card application and your payment history and credit utilization rate will directly impact your score.If you are an authorized user, you can also be subject to a credit check and the organization's account balances and payments can affect your personal information.
Although you're given access to a corporate card, the process works somewhat differently.While your score may be subject to a credit check, the impact on your credit score could be minimal and temporary.In addition, this usage and payment information will be located on the organization's credit report and will not have an impact on you personally.
How do I can ensure that my company card is not affecting my credit score?
As with any credit card, the key to making sure that a company card isn't hurting your score is good credit monitoring.Checking credit frequently is the secret to avoiding score damage as a result of identity theft and fraud.If you just find signs that something is amiss, you can always dispute your credit report. In addition to filing a dispute, you can also sign up for credit monitoring services and ask for a freeze on security requirements.
In addition to ensuring good credit management, you should also exercise good credit habits.That means making payments on time every month, paying as far above the minimum payment as possible and being sure to limit any balances you carry across a card each month.
Business credit scores, too, differ from the FICO scores because they range from 300 - 1,000 instead of zero to 100.
How you rank in the credit rating spectrum?Then you should start using a credit monitoring service to track changes in your credit score.Credible can get you set up by a free service today.
At the end of the day, while adding a business credit card to your credit history can be a significant decision, it is usually one worth making.As long as you or your partner maintain good credit habits, it can actually help increase your score.
You can improve your credit score through Credible's partner product Experian Boost by verifying and choosing the positive payment history information that you want to add to your credit file.
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