Having access to a business credit card can be a great tool for small business owners, providing a convenient way to manage expenses and build business credit. But what if your personal credit score is less than stellar? Does that mean you won’t be able to get a credit card for your business? The good news is that there are still options available, even if your personal credit isn’t in the best shape.
How Personal Credit Affects Business Credit Cards
When you apply for a credit card for your business, most issuers will look at your personal credit score, even if you’re using the card strictly for business purposes. This is because many credit card companies want to assess your personal financial responsibility, especially if your business is new or doesn’t yet have an established credit history.
Personal credit scores are typically evaluated using the FICO or VantageScore models. A FICO score of 669 or lower is considered “fair” or “poor” and can make it more difficult to qualify for traditional business credit cards. Similarly, a VantageScore below 600 is seen as less favorable by most lenders. However, even with a low personal credit score, there are options available to help you get a business credit card and start building business credit.
Options for Getting Business Credit Cards with Low Personal Credit
Despite having a low personal credit score, you’re not out of luck when it comes to business credit cards. Here are some of the options you might consider:
- Secured Business Credit Cards:
Secured business credit cards are designed for individuals who may not qualify for traditional unsecured cards. They work by requiring a security deposit that typically matches your credit limit. For example, if you put down a $500 deposit, you’ll have a $500 credit limit. This minimizes risk for the card issuer and makes it easier for you to get approved. By using a secured card responsibly and making on-time payments, you can gradually improve both your personal and business credit scores. - Business Cards with Lower Credit Score Requirements:
There are business credit card options specifically tailored for applicants with lower credit scores. These cards may have fewer perks and higher interest rates, but they provide a valuable opportunity to access credit and start building a positive payment history. Examples include cards that are aimed at those with fair credit or those that don’t require a personal credit check. - Personal Credit Cards for Business Use:
If you’re unable to qualify for a credit card, consider using a personal credit card temporarily for business expenses. While not ideal for long-term business use, this strategy can help you separate business and personal finances until you improve your credit and qualify for a business card. Also, using personal credit responsibly can help you qualify for other financing options like small business loans in the future.
Tips to Improve Your Chances of Approval
If your credit score is holding you back, there are steps you can take to improve your business’s chances of getting approved for a credit card:
- Improve Your Personal Credit Score:
Start by paying down existing debt and ensuring all bills are paid on time. Regularly review your credit report to identify and dispute any errors that may be negatively affecting your score. - Establish a Business Credit Score:
Building business credit can help your business appear more creditworthy even if you have a low personal credit score. Consider opening vendor accounts that report to business credit bureaus and making timely payments. Over time, this can help improve your business credit profile. - Provide Additional Financial Information:
When applying for a credit card for your business, consider including additional financial information such as revenue statements or tax returns. This can demonstrate your business’s ability to repay what it borrows and may strengthen your application.
What to Do If You’re Denied
If your application is denied, don’t be discouraged. You can still build credit by using a secured credit card or exploring alternative financing options such as vendor accounts, small business loans, or business cash advances. These options may be more flexible and willing to work with businesses that have low credit scores. Building credit takes time, so be patient and diligent in your efforts.
