December 16, 2009
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Business CC's Danger Zone For Owners, Pt.1
Higher risk factorsMany small business owners continue to use their personal credit cards to finance their business. Others are fortunate that they have been issued a business credit card. What many do not realize is that some lenders have been reporting credit histories of the business card on the owner's personal credit history as well as the commercial report. Americans who use their personal credit card accounts for business expenses expect as much from the credit reporting bureaus. However, business owners who open accounts under the business name expect this account to remain a separate entity. Banks who report business card account details under the owner's name, creates a higher debt level which has the potential to show the individual is over-extended and therefore, a higher risk.
Credit card companies say the practice is standard procedure and most small business owners are aware of it. Two major card companies, JPMorgan & Chase and American Express claim that although they check the owner's credit history at the time the card account is opened, they only report on the personal credit reports is the account becomes delinquent. At all other times, both credit card companies say they only report to the commercial credit bureaus such as Dun & Bradstreet (D&B); a practice highly regarded by the small business owner who wants to keep his business separate from his personal history. Small business owners maintain that the whole process seems unfair since they must list their personal income when applying for the card; however, are not allow to list all the business's assets.
One bank who practices reporting business credit card information to personal credit histories is Bank of America. A bank's spokesperson said that the company is monitoring the practice and could possible make some adjustments in the future. Capital One, the first lender to report in this manner, says it will continue to report business information on personal accounts because the practice is not illegal and helps the bank reduce risk. The banks have managed to find a loophole in the law that allows them to report business card account information on personal histories if the individual has given the lender his permission to check his credit.