This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.

“Reader Questions” are answered twice a week by TPG Senior Points & Miles Contributor Ethan Steinberg.

Business credit cards can be an important tool in building up your points balances as they give you more welcome bonuses to consider and generally don’t show up on your personal credit report. You might even be surprised to learn that some of your money-making activities make you eligible to apply for business cardsTPG reader Jeremy wants to know if closing an old business credit card will hurt his score …

I have an Ink business card for a business that I recently sold. I don’t think it shows up on my credit report, will there be any impact to my personal score if I close the card?

TPG READER JEREMY

Jeremy is right to be thinking about the impact to his credit score before he closes any card. 15% of your credit score is determined by your length of credit history, and so closing a card can have an adverse impact on your personal credit score. However, business cards are a slightly different case.

According to myfico.com, these next two mistakes will impact almost two-thirds of your credit score!

Even if you don’t need a business card to manage your expenses, there’s a very compelling reason to consider getting one anyways. Most business cards do not report to personal credit bureaus, meaning the charges you make on these cards won’t show up on your personal credit report and increase your credit utilization rate (which can also lower your score). The one notable exception to this is Capital One business cards, but you can check out this guide for a more detailed breakdown of business credit card reporting practices.

What this means is that in most cases, business credit card accounts have no impact on your personal credit score, and closing one will likely lead to zero damage. The card’s age and the charges you make on it will have no impact on your credit score. You can double check this by logging into a site like Credit Karma and clicking on “age of credit history.” It should show you a list of all the cards aging on your personal credit report. In my case, the half dozen or so business credit cards I currently own are not listed here. Closing one of these cards would in no way affect my credit score.

However, if Jeremy decides to eventually apply for a new business credit card using his Social Security number as a sole proprietor, that will impact his score (albeit temporarily). This application will result in a hard inquiry on his personal credit report and would likely cause a 3-5 point drop, but hard inquiries typically stay for only two years.

Finally, don’t let the above information lull you into a false sense of security when it comes to business credit cards. Even though they don’t appear on your personal credit report, you’re still liable for the charges. If you run up a balance, default on the account and are sent to a collection agency, it has every right to come after your personal finances. Hopefully that won’t ever be an issue for TPG readers who are familiar with our commandments of travel rewards credit cards and wouldn’t think about messing up the potential for future welcome bonuses.

Bottom Line

Jeremy can go ahead and close his business card without worrying about the impact that action will have on his credit score. However, given Chase’s 5/24 restrictions, there’s a good chance that if he closes the account he’ll have trouble reapplying for the same card in the future. One alternative he might want to consider would be downgrading the card to a no annual fee version, like the Ink Business Unlimited Credit Card instead of closing the account.

Thanks for the question, Jeremy, and if you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

 

Know before you go.

News and deals straight to your inbox every day.

2018 TPG Award Winner: Mid-Tier Card of the Year
Chase Sapphire Preferred® Card

NEW INCREASED OFFER: 60,000 Points

TPG'S BONUS VALUATION: $1,200

CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners

Apply Now
More Things to Know
  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • Chase Sapphire Preferred named "Best Credit Card for Flexible Travel Redemption" - Kiplinger's Personal Finance, June 2018
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
  • No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards
Intro APR on Purchases
N/A
Regular APR
18.24% - 25.24% Variable
Annual Fee
$95
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.