Business Credit Card

What Credit Score Is Needed For a Business Credit Card

Credit agencies, creditors, and vendors or suppliers use a business credit score to determine how credible you are when it comes to taking loans. A higher business credit score indicates to potential creditors that you are more creditworthy like your own credit score.

Business credit cards make large purchases like office equipment, machinery, and manufacturing supplies more convenient. However, from self-employed people to CEOs, every business owner should know that business cards are not the same as personal credit cards. Liability protections, eligibility, and incentives might differ from one card to the next, and not all consumer safeguards apply to businesses.

What Is a Business Credit Card?

A business credit card is generally designed for business owners. Owners and operators of large companies, sole proprietors, and everyone in between may be qualified for a business card. It is not necessary to have workers or an office.

Business credit cards are often used for costs related to the business, such as purchasing supplies, office equipment, or travel. Credit cards should not be used to spend money that has not yet been earned or placed in the bank by new enterprises. Many business cards contain provisions in their terms and conditions prohibiting cardholders from using them for personal costs.

Having a business card may help you develop credit for your company, which lenders and other banks would look at if you apply for a loan. Some credit cards provide short-term financing, which can be handy for major transactions.

Who Qualifies For a Business Credit Card? 

Most business owners may get a credit card if they have good to very good personal credit and want to divide their personal and business costs. It is not necessary to have a store or a large number of employees, although evidence of revenue may be needed to acquire a stronger card.

Following are the business owners who may be eligible for a business credit card if they have a good credit score;

  • Freelancers
  • Self-employed
  • Large business owners
  • Corporations
  • Small business owners
  • Limited liability companies

What Credit Score Is Needed For a Business Credit Card

When it comes to business credit scores, the name is somewhat self-explanatory. A business credit score is applied to businesses. This credit score is identified using the data from your business credit report. This may consist of your company details such as the number of employees, data history of your business, payment history, owed amount, account information, etc. 

You’ll probably notice straight away that corporate credit ratings don’t fall into the same statistical range as individual credit scores. The majority of company credit scores range from 0 to 100, whereas the FICO Small Business Scoring Service (FICO SBSS) uses a scale of 0 to 300.

  • Poor Credit Score

500 – 579 is a poor credit range for a business. Hence, if your business credit score falls between 500 and 579, you are highly unlikely to obtain a business credit card because the creditor might not find you creditworthy for the loan.

  • Fair Credit Score 

A fair credit range is 580 – 669. So, if your business falls within this range, there might be some creditors who would issue you a business credit card. Even though you might be able to get a business credit card, it won’t have the same competitive rates as if your score was in the good or very good category. You may as well be unable to obtain a company loan. You’ll probably have to pay a higher interest rate if you do.

  • Good Credit Score

Good credit comprises of credit score between 670 to 739. The creditors would consider you creditworthy, and you would easily be able to obtain a business credit card for your business.

  • Very Good Credit Score 

740 onwards is a very good credit score. You will most likely be offered a variety of credit cards and loans by creditors. In most cases, you’ll also have access to the best rates and conditions offered by creditors. You must make on-time payments, avoid utilizing more than 30% of your available credit and maintain good standing with your present creditors to keep a very excellent credit rating.

Benefits Of a Business Credit Score

Consider your business an investment that will pay you off in the longer run. Your strong business credit score would help your business in numerous ways.

  • Easier Financing — A strong business credit score might assist you in obtaining lower-interest business financing. You will not be required to sign a personal guarantee that holds you personally accountable if & when you take a business loan.
  • Lower Insurance Rates — Insurance policy rates may be very high for a growing business. But, a good credit score can assist you in gaining a lower insurance rate as creditors would find you more reliable. 

Maintaining good business credit is essential when it comes to growing a good business. Like personal credit scores, business credit scores offer tremendous insight into a company’s success to potential creditors, investors, and business partners.

You can remain on top of it by developing good financial habits, such as selecting the ideal credit card for your business, reviewing your credit reports regularly, and contesting any inaccuracies that arise.

Although a business credit card is comparable to a personal credit card, there are several important distinctions that every company owner should be informed of. Business credit cards may help you establish credit, get rewards, and keep costs down by allowing you to make significant purchases with special funding. 

Choose cards that will provide you with a choice of incentives and bonuses that will benefit your company. Don’t overspend on a company card, just like you wouldn’t with a personal card, because you’ll be personally accountable for any debts. 

It is crucial to understand how your credit score impacts the process of applying for a credit card. It heavily affects your chances of obtaining a business credit card. Hence, you should take action to maintain a good business score before applying for a business credit card.

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