Factors like getting approved for a business credit card and quantifying the credit limit are based on the company’s credit history and/or that of its owner. For example, the higher the credit score, the more likely a company will get approved on its own, and the higher its credit limit may be. Company credit ratings are provided by the major business credit reporting agencies, Dun & Bradstreet, Equifax, and Experian, and are based on a few years of payment history and public records. While businesses can usually check their credit scores for free at the credit bureaus, full credit reports may cost money. Therefore, it’s wise to plan for potential extra time and expenses before starting the application process.
In cases where a company hasn’t built its own credit score, the business owner can substitute their personal credit score. The card issuer will typically do a hard inquiry on the applicant’s personal credit history to determine creditworthiness. As a rule of thumb, a “good” personal credit score – about 650 or higher – is usually the minimum needed for an unsecured business credit card, although every issuer has its own criteria. Personal credit scores are available for free through annualcreditreport.com and many banks.
Once you have an idea of your credit score, it will make it easier to determine which credit card is the best fit for the company. Start narrowing options by identifying the programs with achievable qualification criteria, such as minimum credit scores, company legal structure, or access to personal guarantees. Next, filter the programs for features that are most important for the way the company does business – what’s valuable for one company may not be for others. Typical features to consider when choosing the best business credit card for your business include:
For more on different types of business credit cards, read “Different Types of Business Credit Cards.”
Application requirements can differ by business credit card program but it’s a universal criterion that the application must be made by someone who is 18 years or older and authorized to make financial decisions for the company. In most cases, the application can be made over the phone or online.
Gathering all required information in advance can make filling out the application faster and easier. Though card issuers often follow up with individual questions and requirements, these are among the common application requirements:
Most online applications are evaluated quickly, and credit cards are mailed to those approved. Like personal credit cards, business credit cards need to be activated before use. And remember: Many business credit card programs require a personal guarantee from all owners with a 20% or more stake in the business. In other words, they require owners to take personal responsibility for the bill if the company cannot pay it.
If an application for a business credit card is denied, it’s important to learn why. Sometimes the reason is administrative and can be easily fixed, such as a typo or an unrecognized address. Other times, it can be due to poor credit scores. When this occurs, it’s important to try to raise the business’ credit score prior to reapplying. For example, on-time bill payments can go a long way in improving a business – or personal – credit score. Another way for businesses to boost their credit score is to open trade credit lines with a few suppliers and request that they report good payment history to the credit agencies. It’s also a good idea to periodically monitor credit reports for errors.
Alternatively, a secured business credit card can be a way to access credit and build credit history. If appropriate, it may also help to consider applying for a credit card designed for startup businesses.
