Obtaining a business credit card is one of the first steps in building your business credit. When you apply for a business credit card, creditors often rely on your personal credit history to determine your eligibility for one.
Here’s an overview of the types of business credit cards you may qualify for, depending on your personal credit score.
How to Find Your Credit Score
If you’re wondering how to find your personal credit score, you can easily check it on one of the three primary creditors’ sites or use a site that shares your scores from all three agencies. You’re entitled to receive one free personal credit report per year. In addition, if you need to check your business credit score, you can purchase a report from Dun & Bradstreet, Equifax, or Experian. These can range anywhere from $30-$150, depending on the bureau.
Finding a Business Credit Card to Fit Your Score
Now that you know your personal credit score, it’s time to review the different FICO credit score ranges and what they mean. There are four primary credit score ranges: poor, fair, good, and very good. The information below explains why your credit score might fall within a certain range and how that impacts your business credit card options.
Poor or No Credit: Below 579
Any credit score under 579 falls into the poor credit range. If you’re in this category, it typically means you either have no credit history or you have several negative factors—such as late or missed payments, defaulting on a loan, or bankruptcy—impacting your credit score. It also means you’re unlikely to obtain an unsecured credit card or loan approval.
If you do manage to gain approval for an unsecured card, it will likely have a high interest rate and less-than-ideal terms. With a poor credit score, you may still qualify for a secured credit card to help you build the credit you need in order to obtain an unsecured card in the future.
Fair Credit: 580-669
A score in the fair credit range usually means you’ve had one or two negative factors impacting your credit, but creditors still consider you somewhat creditworthy. Perhaps you made a few late payments, for example, or refinanced your home. While some credit card companies may still give you a business credit card, it won’t feature the competitive rates you’d find if your score fell into the good or very good ranges. Also, you may not be able to secure a business loan. If you do, it would typically come with a higher interest rate.
Good Credit: 670-739
Personal credit scores of 670 to 739 fall into the good credit range. That means creditors consider you an acceptable borrower and will probably approve you for a range of credit cards — although not with the same rates and terms offered to people with very good credit scores. People in this range typically have few negatives on their credit reports, if any at all, and a longer credit history. Creditors generally consider you a safe bet.
Very Good Credit: 740 and Above
If your credit score is 740 or above, creditors will likely offer you a wide range of credit cards and loans. In addition, you’ll usually gain access to creditors’ best rates and terms. To maintain a very good credit status, you must make your payments on time, avoid using more than 30 percent of your available credit, and remain in good standing with your current creditors.
Getting Denied with a Decent Credit Score
Sometimes, despite having a good credit score, a creditor may still deny your business credit card application. Some of the most common reasons creditors do this include:
- Your debt-to-income ratio is too high. Most creditors expect applicants to have a debt-to-income ratio lower than 36 percent while some have even stricter guidelines.
- Your credit history is too short. Some creditors prefer to lend to people with a long credit history. You may need to wait a few years and try applying again.
- You filed for bankruptcy in the past. This may automatically disqualify you with some creditors — no matter how long ago you filed for bankruptcy.
- You’ve missed a few payments. If you made a few late payments, even if that happened years ago, some creditors may consider this grounds for denial.
- You don’t make enough money. Creditors use specific algorithms to determine your eligibility for a card. If you don’t make enough money, you may not meet their approval criteria.
- You opened too many cards recently. Creditors may question your creditworthiness if you regularly open and close credit cards.
It’s important to understand how your credit score impacts the application process for a business credit card. If your credit score is on the lower side, check out our review of the Wells Fargo Business Secured Card, a secured business credit card that will help you to rebuild your financial footing. If you have excellent credit, take a look at our review of the Capital One Spark Cash for Business credit card.
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