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I am working with a younger person who is in a bit of predicament.
He has a credit score in the 500s from primarily using up a large % of his available credit card limits based on purchases that he could not afford to pay in full at the end of every billing cycle. So we are working together and have made a plan to pay the balances down and spend existing money going forward in a disciplined way.
The other issue working against him is that he is a heavy business traveler, 2-3 trips a month.
His company requires him to float the business expenses on his personal credit.
I asked him to approach his company to get a company AMEX so that these purchases didn’t work against his credit score, but they declined that request. They told him nobody in the company has a company credit card.He likes his job, and is not looking to change to a as a business traveler.
Besides aggressively paying down his personal spend inside the balances as aggressively as possible, can anyone suggest alternatives we might consider so that he doesn’t regularly have business expenses taking up his credit limits and lowering his credit score?
Would the company consider providing a travel advance? Or PROMPTLY reimbursing the employee (not waiting until payday)? Then the employee could immediately use that money to pay down the credit card instead of waiting until the billing cycle is complete.
I’m fairly certain that credit scores are an instantaneous snapshot. So, if a person had a $5000 limit, and charged $4800 – even if they paid the entire thing off before the due date, if the credit score was pulled before the pay-off, the credit usage would be considered pretty high. That is why I would recommend that your client apply the payment to the credit card as soon as they receive the company reimbursement instead of waiting until the credit card due date.
Similarly, your client might consider making that monthly “pay-down” payment as soon as he gets paid each pay-period instead of waiting until the billing cycle. That will reduce interest on the balance as well as show a lower balance whenever the credit score is pulled (and also limits over-spending if he has gotten into the new habit of only buying things for which he has the cash).
I don’t have any words of wisdom based on experience, but some interesting thoughts here: https://www.zerodayfinance.com/business-expenses-on-credit-card.
I’ll be interested to read what other colleagues have to say on this one.
If he is not, I would suggest only charging business expenses on the credit card and not personal. If he wants to use a credit card for personal use, use a different credit card. Keep business and personal expenses separate. Second, I would suggest he immediately reports his expenses to the company for immediate reimbursement and pay off the credit card immediately. If timing is an issue, possibly try to get him ahead by setting money aside in a separate account to build-up for paying the credit card. In other words, try to get him to save for the expense ahead of the trip so it can be paid off when he returns, then, he will be reimbursed.
I wrote an article for my front-of-mind newsletter, and from my research for the article, I found that the credit score is generally (we don’t know the exact proprietary formula) 35% payment history and 30% debt burden. Length of history, types of credit, and recent credit searches make up the rest. My research indicated that payment history was counted as regular payments toward the balance (at least the minimum) and that skipping paying was worse than regular but less-than-full payments. Others have talked about debt burden and ideas there.
What a predicament especially for someone who is trying to straighten out his credit situation! I agree with comments above and wonder if there might be another person in the company he can approach with his request for a travel advance and/or a company credit card. It seems excessive that he is required to put several thousand dollars on a personal credit card monthly. Keep us posted as you gain traction. I’m curious how this situation gets resolved.
Hi Jeremy…I would suggest him approaching his Human Resources department for a copy of the Employee Travel Policy or Employee Handbook and find the section that clearly states how travel expenses are supposed to be handled, such as employees are required to cover their own travel expenses and submit an Expense Report to be reimbursed “after the fact”.
If he is an Employee and there is nothing in writing stating this, then he can request the company book his travel (air, hotel and car) and pay those direct and he only submits his meals which will get reimbursed.
If he is a “Contractor”, then there is probably something in his contract or employment agency contract that says all Travel Expenses are reimbursable upon completion of travel, otherwise he is probably out of luck there.
I had to deal with this all the time at my Corporate Job, so give me a call if you need more information.
diane
One thing he could work toward (seeing as he’s paying off debt now) is a totally separate bank account with a debit card that he feeds with enough money to cover typical monthly expenses. (If he rents cars, Dollar has a program where people with debit cards can preregister as a member so they don’t need a credit card to pay.) It might be worth is to press “pause” on his debt pay-off plan to fund this other account.
Debt snowballs work!
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