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You had a business credit card once, and you don’t anymore. Maybe your employer gave you one, and then went out of business. Or you lost your job. Or you changed jobs. Whatever the reason: what does this mean for your credit score and record?
A lot depends on what’s going on with your personal credit, as well as whether your (possibly former) employer paid the card’s remaining balance, experts said.
There are precautionary steps you can take to ward off some trouble, and there are things you can do after you relinquish the card to prevent credit damage. But not all of this, unfortunately, is going to be within your control. Here’s what you need to know.
See related: 6 questions to ask about your company credit card
Tips to protect your credit when your employer-issued card is closed
Preemptive steps to take when receiving a corporate business card
Learn your personal liability up front
When your employer first hands you a business credit card, “ask if it will show up on your personal credit history,” said credit expert Gerri Detweiler.
Also, if it’s offered to you, read the card’s terms and conditions, she said. Follow that up by checking your personal credit over the next few months to see how the new card reports, Detweiler suggested, so you understand the effect of this card on your record.
Regularly submit your expense reports
“Make sure you’re getting those in in a timely manner,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling. That’s the best defense you have against outstanding balances on a card for which you don’t make payments.
Make sure this isn’t your only credit card
Diversity is key – everyone should have at least two personal credit cards in her wallet, said Michael Bovee, founder of the Consumer Recovery Network.
“You can buy a latte every month and pay it off, I don’t care,” he said, “but have two revolving accounts.” That way, if your employer’s card gets canceled, you don’t find yourself at the ground floor of the credit-building world.
Regularly transfer or use the rewards you build on the business card. Detweiler learned this the hard way years ago, when her employer fell behind on its card payments. Suddenly, the 50,000 miles she’d amassed on her corporate American Express card vanished. “Had I known, I would have booked something real fast,” she said.
Steps to take right after you learn the card was canceled
Make no assumptions
Just because no one sends you a bill doesn’t mean one doesn’t exist, and that it doesn’t have your name on it somewhere, McClary said.
“Be as proactive as you can,” he said. “You don’t want any surprises.”
Ask to see the final bill for the card
“Make sure the card is canceled,” Detweiler said. “See a final bill when the balance is zero.” If, for whatever reason, that’s not possible, fear not – you can still get on top of this one.
Get a copy of your credit report
If you didn’t check while you still had the card, now’s the time to pull a report from all three agencies – Equifax, TransUnion and Experian – and look to see if the card is showing up on any of them. “If it’s not showing up on your credit report at all, it’s not going to be impacting your credit score,” McClary said.
If this was your only credit card, apply for a personal one
Lenders can still see the corporate card on your credit report, so “it helps as far as credit age goes,” Detweiler said.
Where it can’t help is with your credit utilization ratio, which measures how much of your available credit you’re using each month. At least as far as credit cards go, you would now have zero available credit.
If you find you don’t qualify for most cards, Bovee recommended applying for a secured card with a low or nonexistent annual fee, where the issuer will review the card periodically and graduate you to an unsecured card if you’re meeting their borrowing standards.
Secured cards are ones where the borrower puts up a deposit as collateral, and this deposit becomes the card’s spending limit.
These deposits are often refunded if a borrower pays his balance in full each month. Bovee particularly likes the no-annual-fee Discover it® Secured. Other secured cards that charge no annual fee include Citi Secured Mastercard and Capital One Secured Mastercard.
Call the card issuer
Ask the bank what is going on with the card – if there’s a balance, and if you have liability for that balance.
If they refuse to tell you, demand an answer. “You just pursue it until you get closure,” McClary said.
If you’re told you’re in the clear…
Great, but don’t leave it at that. “Get something in writing from the creditor,” McClary said, “that verifies you are not responsible for any remaining balance on the card.”
Steps to take if there’s a balance – and the bank holds you responsible
Get ready for things to get complicated
“If it’s a corporate-sponsored card that the employee has taken out with a personal guarantee, then [the employee is] on the hook for it,” Bovee said. Clients will come to him baffled, not understanding why they’re being chased for a debt that they thought belonged to their former employer.
“But the company can’t pay it anymore because, you know, businesses do fail,” Bovee said. Often clients have been living paycheck to paycheck; now that those paychecks have stopped, they also learn that if they don’t pay the debt on the defunct corporate card, their credit rating will drop. “It’s a rude awakening,” he said.
Try to at least make the minimum payments on the card. “If you don’t,” Bovee said, “you could potentially show [on your credit report] as 30, 60 or 90 days late, and it does not take much of that to, say, drop someone’s 720 score down to a 660.”
Dispute the balance with the lender
Insist that the unpaid expenses are the responsibility of the company that gave you the card, and not yours, McClary said. If this doesn’t work…
Consider hiring an attorney
You can always take the company to court to either clear your record, or at least recoup enough money to pay off the balance. There are two ways to frame this, McClary said: suing either for the damage the closed corporate card caused to your credit rating, or suing the company (or its owners) to pay off the outstanding balance.
See related: Damaged credit: Can you sue?
Steps to take once everything is finally settled
Add a written statement to your credit report
Consider adding a written statement to your credit report. Every consumer has a right to do so, McClary said. In it, you can explain to any prospective, future lenders what happened with this particular card and how it led to a blemish on your credit report that was not your fault.
“Putting that out front goes a long way to explaining anything that might come up when applying for a loan or a credit card,” he said. If you fail to take this step, “lacking any explanation or detail, a lender is led to assume the worst.”
See related: How to add a 100-word written statement to your credit report
Make sure you take care of your credit
And remember… it’s always best to maintain at least one, if not two or more, personal credit card accounts.
“Pay on time,” Detweiler said, “and keep balances low. That way, you’ll always have something to fall back on.”