How a Corporate Card Can Impact Your Credit Score

It’s a common misconception that a corporate card automatically impacts your personal credit. In most cases, it doesn't, as the primary liability for the debt rests with your employer.

1. Personal Liability Agreement: The process begins if your card agreement includes a personal guarantee. By signing, you agree to be personally responsible for the debt if your company fails to pay.
2. Company Payment Default: A potential impact is triggered only when the company becomes delinquent on its payments. At this point, the card issuer may look to the secondary party responsible for the debt.
3. Reporting to Credit Bureaus: If you are held personally liable for the defaulted balance, the card issuer can report the delinquency, late payments, or collections account to the credit bureaus under your name.
4. Credit Score Damage: Once a negative item like a late payment or collection appears on your personal credit report, it can directly lower your FICO score, impacting your future borrowing ability.

How Much Will a Corporate Card Affect Your Credit Score?

The impact of a corporate card on your personal credit score depends on several key factors. Here are the main things to consider:

• Card Liability: Most corporate cards are issued under corporate liability, meaning the company is solely responsible for the debt. This structure typically prevents the card's activity from appearing on your personal credit report.
• Reporting to Bureaus: Some issuers report corporate card activity, especially negative information like late payments, to personal credit bureaus. It's crucial to understand your card issuer's specific reporting policies before you start using the card.
• Personal Guarantees: If you provide a personal guarantee for the card, you become jointly liable for the debt. In this case, the account activity is more likely to be reported on your personal credit file.

How You Can Avoid a Corporate Card Affecting Your Credit Score

Review the Cardholder Agreement

Before accepting a corporate card, review the cardholder agreement to understand its reporting policies. This document outlines whether account activity is reported to personal credit bureaus. Clarifying the terms of liability is the first crucial step in protecting your personal credit from potential negative impacts.

Ensure Timely Payments

Regardless of your company’s reimbursement schedule, ensure the card balance is paid on time. If you hold individual liability, any late payments can be reported to your personal credit file. Proactively track statements and expense reports to prevent delinquencies from damaging your credit score.

Monitor Your Credit Reports

Regularly check your credit reports from Equifax, Experian, and TransUnion. This helps you verify if the corporate card appears and ensure all reported information is accurate. Promptly disputing any errors is essential to prevent the corporate account from incorrectly affecting your credit history.

Choose the Right Card to A Corporate Card

No matter your current standing, improving your credit score is an achievable goal that can significantly boost your financial health. With consistent, positive financial behaviors, you can see meaningful changes in just a few months.

• Set up automatic payments. Your payment history is the single most important factor, so automating payments ensures you never miss a due date and damage your score.
• Reduce your credit utilization ratio. Aim to keep your balances below 30% of your total available credit, as high utilization can signal financial distress to lenders.
• Monitor your credit reports. Regularly check your reports from Experian, TransUnion, and Equifax to identify and dispute any inaccuracies that could be dragging down your score.
• Become an authorized user. Being added to an account with a long history of on-time payments and low utilization can give your credit score a boost.
• Diversify your credit mix. Lenders prefer to see a healthy mix of credit types, such as revolving credit from cards and installment loans like auto or personal loans.
• Limit hard inquiries. Avoid applying for too much new credit at once, as each application can cause a temporary dip in your score.

The Bottom Line

Typically, a corporate card will not affect your personal credit score because the company is liable. However, some agreements may hold you personally responsible for unpaid balances, which could impact your score.

Frequently Asked Questions

Can a corporate card help build my personal credit?

Typically, no. Most corporate card programs do not report activity to personal credit bureaus, so it won't contribute to or help build your credit history.

What happens if I miss a payment on a corporate card?

If you are personally liable for the card, a missed payment can be reported to credit bureaus and negatively impact your personal credit score.

Does applying for a corporate card involve a hard credit check?

It depends on the card issuer and your company's agreement. Some may perform a hard inquiry on your personal credit, which can temporarily lower your score.