Do Corporate Cards Affect Credit Score?

Does the use of Corporate Cards have any impact on credit scores?

A corporate card is something that one looks forward to when joining a new company. The company card is very helpful when it comes to making payments for traveling, food, and any other expenses incurred in the course of doing business. However, would getting a corporate card affect one’s credit rating? Alright, let me take a closer look for you.

What is a Corporate Card?

A corporate card, also referred to as a business credit card, is a card that an employer provides to employees for business expenses. It is the company’s liability to clear the invoice monthly not that of the individual employee. Corporate cards can be used to pay for things such as traveling, accommodation, meals, stationery, and all other business expenses without any personal liability from the employee. It is also essential to note that some companies have strict rules regarding the use of the corporate card in making purchases.

Corporate Card Issuers

Visa, MasterCard, and American Express are among the largest issuers of corporate cards targeting business customers. These cards function like the conventional consumer credit card however with additional oversight controls and management options that are suitable for business. For example, corporate cards always come with spending limits and allow only selective kinds of transactions linked to frequent business merchant categories.

Do Corporate Cards Improve Your Credit Score?

The simple response to this question is: No, as corporate card accounts vary and are independent of company credit cards, owning a corporate or business credit card does not affect your credit scores or credit history in any kind. These show nowhere on your personal Equifax, Experian, and TransUnion credit reports used to determine your FICO and other personal credit score.

On a corporate card, however, regular payments and making sure one does not over the limit reflect accountability. If you apply for a credit card or a personal loan, for example, showing that you can handle this form of credit responsibly can help you persuade a lender that you are creditworthy. Having a business card won't assist, however, improve the reports or the scores.

Differences between Business Credit Cards and Personal Credit Cards

Here are some key ways personal and corporate cards vary when it comes to credit impact.

The fact is that a company assumes liability for balances, not you. If you quit your job, you are not required to clear any balance.
It is reported on the business credit report of the company as opposed to the personal credit report.
It does not get reported to the credit bureaus and hence does not appear on your credit report. Thus, there is no payment history on the consumer credit reports.
There is no carry-over of a positive payment history that can be useful in improving your credit score.
This means you do not have issues with your corporate card affecting your creditworthiness.
When applying for corporate cards, credit inquiries are only reported on business credit reports.
It is noteworthy that corporate cards do not dictate the duration of the personal Credit history.

When it comes to convenience and flexibility, corporate cards have much to offer, but only consumer credit cards, the ones you apply for, and for which you are fully responsible for repayment, can aid in building one’s credit.

There was a time when Corporate Cards could harm you in certain ways:

That is because most of the time, corporate cards are used solely in business, and not in your pocket. However, in certain situations, corporate card problems could create personal credit complications.

Company Delinquency: If your employer often pays late or has balances on corporate credit accounts then this information will be reflected in business credit reports. This could make lenders worried if you apply for a personal loan in the future due to severe delinquency problems.
Authorized User Status: There are some organizations where employees are included in the list of authorized cardholders and given corporate cards instead of account-specific cards. Voluntary user activity is reflected in your personal credit history as positive or negative.
Joint Liability: There are a few corporate cards that require employees to be equally responsible for the outstanding balance as the employer is. In layman's terms, what it means is if the company has failed to meet its obligations, creditors can come after employees. Negative information would then reflect on your credit and produce more delinquencies. But joint corporate card liability is very much uncommon these days.
Mistaken Reports: As a small business owner, there is a very small possibility that a corporate card account is reported to your credit file if by any chance you have the same name as the cardholder. Checking on the three credit reports is useful in identifying any reporting errors.
Leaving a Job: It is recommended to destroy a corporate credit card immediately when changing a job or retiring to avoid such situations when a company may attempt to withdraw the money for the charges made by the former employee.

Use Corporate Cards Carefully

Like with any other corporate assets, corporate cards should be used according to the policy and the guidelines set in the company. Be wise when making a purchase, buy only what is necessary for business-related activities, record the expenses accurately, keep copies of receipts where necessary, and submit reports as and when expected. If handled with proper care and maintenance, corporate cards can significantly simplify the business experience while not hurting personal credit.

When you use a company-issued card properly, there is no need for your credit rating to be affected. But do not forget the key difference between business credit and consumer credit – and what influences what!

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