Do Business Credit Cards Count Towards 5/24?

The Chase 5/24 rule is a guideline for individuals seeking new credit cards. This article addresses how business credit card applications and accounts impact the Chase 5/24 rule.

The Chase 5/24 Rule

The Chase 5/24 rule is a guideline employed by Chase that influences approvals for new credit card applications. Under this guideline, Chase may decline an application if the individual has opened five or more personal credit accounts across any issuer within the preceding 24 months. This count includes personal credit cards from Chase and other financial institutions.

This rule focuses on the number of recently opened personal credit accounts reported to consumer credit bureaus. Accounts that typically count towards the 5/24 limit include personal credit cards, such as store-branded, airline co-branded, or general purpose cards. Even if an account is closed shortly after opening, it generally still counts towards the 5/24 total for the 24-month period it was open.

This rule applies to the number of accounts opened, not necessarily the number of applications submitted. A denied application does not typically count towards the 5/24 total, but an approved account does. This guideline is a significant factor in Chase’s decision-making process for new credit card applications.

Business Credit Cards and 5/24

Business credit cards generally do not count towards the Chase 5/24 rule. This distinction arises primarily from how most business credit card accounts are reported by issuing banks. Unlike personal credit cards, the majority of business credit card accounts are not typically reported to an individual’s personal credit reports.

This practice holds true for business credit cards issued by Chase itself, as well as those from other financial institutions. If an individual opens a business credit card with Chase, the account details are usually not reflected on their personal credit report, which means it does not contribute to the 5/24 count.

While the business card account itself usually does not appear on personal credit reports, the initial hard inquiry generated during the application process often does. This hard inquiry is a record of a credit check and typically has a minor, temporary impact on an individual’s credit score. However, this inquiry does not signify an opened account for the purpose of the 5/24 rule.

Rare exceptions exist where a business card might appear on a personal credit report, such as in cases of severe delinquency or default by the business. If a business card account goes into default, the issuer might report the negative information to the individual’s personal credit report, especially if a personal guarantee was provided. Such instances are uncommon and represent a deviation from the standard reporting practices for business credit cards in good standing.

How Credit Reporting Affects 5/24

The fundamental reason business credit cards typically do not count towards the 5/24 rule lies in the distinct systems of credit reporting. Consumer credit bureaus, such as Experian, Equifax, and TransUnion, primarily track personal credit accounts. These agencies compile information on an individual’s personal loans, mortgages, and credit cards, which is then used to generate personal credit scores.

In contrast, business credit bureaus, including Dun & Bradstreet, Experian Business, and Equifax Business, are dedicated to tracking the creditworthiness of businesses. These bureaus collect data on business loans, trade lines, and business credit cards. Most business card issuers report account activity exclusively to these business credit reporting agencies.

When an individual applies for a business credit card, they often provide a personal guarantee, which means they are personally responsible for the debt if the business defaults. Despite this personal liability, the account itself is generally opened under the business’s name and reported to business credit bureaus. The Fair Credit Reporting Act (FCRA) primarily governs consumer credit reporting, and business accounts generally fall outside its direct scope.

Therefore, the mere act of opening a business credit card, even with a personal guarantee, does not typically result in the account appearing on an individual’s personal credit report. This separation in reporting mechanisms is the underlying reason why business credit cards do not register as new accounts for the purpose of the Chase 5/24 rule, as the rule relies on data from personal credit reports.

Other Factors Impacting Chase Card Approvals

While adherence to the 5/24 guideline is a significant consideration for Chase, it is not the sole determinant for credit card approvals. Several other standard factors are evaluated when an applicant seeks a new credit card. An applicant’s credit score is a primary element, with higher scores generally indicating a lower risk to the lender.

An applicant’s income is also assessed to ensure they have the financial capacity to manage additional credit. Lenders consider the length and depth of an applicant’s credit history, preferring individuals with a consistent record of responsible credit management over several years. The total amount of existing debt, often expressed as a debt-to-income ratio, also plays a role in the approval decision.

Existing relationships with Chase, such as having checking or savings accounts, can sometimes be a positive factor in the application process. While meeting the 5/24 guideline can significantly increase the likelihood of approval, these other financial health indicators are equally important.