Business credit card can damage your personal score
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Dear Your Business Credit,
Hello. I work for a small financial firm and was issued a company card for company purchases. The company card balance and credit limit appear on my personal credit report. My husband works for a large financial firm, and his company credit card information is not in his report. The bad news is that my company typically holds up to 60 percent of a balance ratio, while the good news is my firm is never late with a payment. How do I remove the company card from my personal report without affecting my personal score? – Molly
Ouch! It’s hard to stay on top of your credit score when it is being influenced by things you can’t control – like how much your employer borrows.
Company credit cards come in many forms.
- In some, the bill goes directly to the company, while with others, the employee pays and gets reimbursed.
- Some are charge cards that must be paid and can never have a balance. Others, such as yours, can carry a revolving balance.
- Some are the sole responsibility of the company, and some make the employee liable.
- And, as you have discovered already, some appear on the employee’s personal credit report, while others do not.
You need to find out where you stand. Call the 800 number on the card and request a copy of your credit card agreement.
From what you have said, your company’s policies are unfair to you. Your employer has in effect given you a pay cut by associating you with a card that has a very high credit utilization. That behavior is cutting your credit score, making it harder and more expensive for you to obtain a mortgage, car loan, credit card or any other financing.
The good news is that if you are an authorized user on the company credit card account, all card issuers let authorized users be removed upon request. However, you’d then need to find another way to handle your business purchases, such as a personal card. That could be inconvenient if company policy encourages you to use the corporate card or you need to make big purchases for work and have to wait a while for reimbursements.
As to whether closing the account would affect your personal credit score, that is difficult to predict. It would likely improve your personal score by removing a high-utilization card, but there are other credit scoring factors in which removing a card from your account would be a negative. A business credit card that is reported on your personal credit report may be treated the same way as a personal card, as I discussed in an earlier column, “Maxing out a business credit card.”
There is a method you can use to determine how much your credit utilization will affect your credit score, as my colleague Barry Paperno has outlined in his article “Credit utilization rules for managing your credit score.” If you’d like to figure this out in your case, I encourage you to check it out.
If you don’t want to close the card, there is another method you could use to protect your credit score. By taking steps to bolster your own credit score, you may be able to offset the negative impact of your company’s credit utilization.
You mentioned that you work for a small firm. If it is a very small firm and you make a lot of purchases, it is possible that you could lower the company’s utilization by reducing the number of purchases you make on the card. For instance, perhaps you are picking up office supplies at the store and using your credit card to buy them, because it is convenient. You might instead start ordering them through the office supply catalog so they are paid for when the supplier invoices for them. This probably won’t move the needle very much, unless you play a big role in purchasing, but it could help somewhat.
Once you figure out the impact of closing the card, you’ll know what your next move should be.
See related: 6 questions to ask about your company credit card
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