For many small businesses, a business credit card often plays an essential role.  These credit cards assist the business in regulating cash flow, allowing for larger up front purchases, and maybe even taking the place of a loan.  What many business owners may not know is, with its many advantages, business credit cards may hurt a cardholder's credit score.

It was previously customary for credit card issuers to report business card activity to the three credit reporting agencies.  These include Experian, Equifax, and TransUnion.  Currently, some major credit card providers have started reporting personal credit card information along with business card transactions.  This may have increasingly negative impact on the cardholder's credit score.

Cards for small businesses typically have very high credit limits to support the high cash flow usually involved with running a small business.  The problem with reporting business activity along with personal credit, is that the combined debt amount can make it appears as if the cardholder has overextended themselves by taking on excessive credit card debt.  Debt accumulated by business expenses usually involves figures that is far beyond an individual's personal income.  This will increase a cardholder's credit utilization ratio drastically, thereby lowering their credit scores.

Another potential issue with this is that other credit card issuers may look at the amount of debt you've accumulated with your business credit card and automatically label you as someone of high credit risk.  This can potentially decrease credit limits and increase interest rates for the cardholder.  This practice could also impact the cardholders debt to income ratio by making their debt obligations look artificially high. 

To avoid these circumstances, those looking to apply for a business card should seek providers who report business credit card activity individually.  Both JP Morgan Chase and American Express reports business card accounts separately to commercial credit bureaus such as Experian's Small Business Services or D&B.  Even though this is the case, business owners and cardholders should be aware that all credit card providers will report defaults to the major credit bureaus.