If you’re a business traveler, having a corporate card can make it easier to track your expenses and keep your business and personal spending separate.
You may wonder, however, whether all that travel on the company dime is affecting your credit score. The answer depends on several factors, including who applied for the card, who’s paying the bills and whether the account is in good standing.
If it’s reporting, it’s affecting your score
Various factors will determine whether card issuers report your corporate card to credit reporting agencies. If they do, that card would show up on your personal credit file and factor into your scores, says Ethan Dornhelm, vice president of scores and analytics with FICO, one of the most commonly used credit scores.
“If corporate credit cards are not showing up in the credit file, they will not have an impact on the FICO Score, because FICO Score only considers information found in the consumer credit file,” he says. “In the event that a corporate card is reflected on a credit file, it is not given any special treatment relative to other types of credit cards. Positive behavior such as on-time payment will be rewarded accordingly, for example.”
If you had to apply for it yourself, it affects your score
In general, if you must personally apply for the credit card (even if it’s going to be paid by your company), the card issuer will pull your credit when approving the card. That hard inquiry will have a small (but temporary) negative impact on your score.
If you’re added as an authorized user, it could affect your score
In some cases, at smaller companies, rather than getting your own card, you’ll simply be added as an authorized user to a company account. As with other kinds of corporate cards, the impact on your score will depend on whether the card is reported to the credit bureaus. Authorized user accounts that are reported to the credit bureaus do factor into a FICO score, but they’re weighted less heavily than accounts that the consumer is legally responsible for paying, Dornhelm says.
Know your liability
It’s becoming increasingly common at larger organizations for companies to take on full liability for the card and pay the bills directly to the issuer on your behalf. Nearly 80 percent of companies use this model, up from less than 60 percent a decade ago, according to data from RPMG Research Corporation, which analyzes corporate card trends.
“Companies are shifting to corporate liability for cards because it’s gotten a lot easier to digitally track and verify expenses,” says Richard Palmer, founder of RPMG Research Corp. “Plus the company doesn’t have to deal with defaults or late payments, and they get a rebate for company spending.”
If you have a corporate-liability card, there is typically no impact on your credit score from use of the card, assuming all goes well. However, you might end up responsible for the bill. Some companies have their employees use cards with either individual liability or joint and several liability. In those cases, even if your company handles payments, the card issuer can come after you for unpaid bills.
Your cardholder agreement, which you receive along with your card, should spell out whether your card has corporate liability, individual liability, or joint and several liability, which holds both the company and the employee responsible for purchases and payments.
“Always read the fine print,” says Rod Griffin, director of consumer education at Experian, a credit reporting agency. “Even if you’ve done everything right, but your company fails to pay, it’s possible that a late payment could get reported to a collection agency. That could trigger personal responsibility, so you want to make sure that you understand your obligations.”
If you can’t remember or didn’t notice that part of your card agreement, call the card issuer and ask, or inquire within your finance department at work.
What if you’re the business owner?
If you run a small business, it makes sense to get a small business card for lots of reasons, including the potential to earn business rewards and the ability to separate your business assets from personal. In this case, you are usually personally liable for all charges on the business card.
While using the card won’t impact your personal credit utilization ratio, late payments could appear on your personal credit. Some small business card issuers don’t report to consumer credit bureaus. If, however, you were to default on a small-business card, the bank would come after you personally for the debt, which would appear on your personal credit reports.
Finally, whether you’re a sole proprietor or have employees, your small business card usage will be a factor in your small business credit score. That score includes information similar to what a personal credit report includes, but specifically focuses on the business’ debt. Read more about business credit scores.
How to protect your credit
No matter what type of corporate card you have, request your free credit reports from the three major credit bureaus once a year at AnnualCreditReport.com. That will show you whether any corporate accounts are appearing and how they’re affecting your credit. Checking your reports is worth doing anyway to make sure that there aren’t any errors on your report or red flags that could indicate identity theft.
If the card is in your name, be sure to close out the account if you leave your job. While it often makes sense to leave older personal credit cards open to increase your credit utilization ratio and boost your credit, it’s best not to do the same with corporate cards.
In many cases, you won’t have a choice.
“Your employer may require you to turn it in when you leave,” says credit expert John Ulzheimer, who has worked with FICO and Equifax. “Essentially your use of the card will be terminated but your employer’s master account will remain.”