If you’re a small business owner, especially one who doesn’t have a great personal credit score, you might be looking for a business credit card that doesn’t require a personal credit check. That way, your business’ interest rate and credit line would be evaluated on the company’s merits, rather than your own FICO score.
Unfortunately, it’s pretty hard to find an unsecured, no credit check card for smaller or newer businesses. Some banks waive the personal credit check requirement if you have a strong business credit history—that usually means a more established business, a track record of on-time payments, and strong sales and revenue figures.
We’ll go into building business credit later on, but for now, know that most cards for early-stage businesses require both a personal credit check and a personal guarantee. Still, if you don’t have good personal credit but want a solid business card, you’ve got three options.
1. Find a Cosigner
Many business credit card offers require good or excellent personal credit—and don’t let you have a cosigner. On the bright side, you don’t necessarily need a business credit card to pay for business finances. You can apply for a personal credit card and use it for your company’s purchases. Although, keep in mind this might make your life more difficult in the long run if you mix personal and business expenses on the card.
Having a cosigner means you benefit from their good credit, potentially qualifying you for a lower rate or better rewards. On the downside, you’re both liable for the debts you incur—regardless of whether you’re an LLC, sole proprietorship, S corp, C corp, or pretty much any kind of business. Make sure you’re upfront about the risks and responsibilities of being a cosigner. You’ll probably have better luck finding a personal card that allows for a cosign; check out the Chase Sapphire ReserveSM if you want good rewards or the Citi Diamond Preferred® if you want a long 0% APR period.
2. Apply for an Average Credit Card
Your next option is to find a business credit card that’s okay with less-than-stellar credit. The Capital One® Spark® Classic for Business is one of the best options out there for average credit—it has no annual or foreign transaction fees, and even offers 1% cash back on every purchase.
If you use the card responsibility and build up a history of on-time payments, you can upgrade to the Capital One Spark Cash Select or Capital One Spark Cash—both great cash back cards, offering 1.5% rewards with no annual fee, or 2% rewards with a $59 annual fee waived the first year, respectively. Business or personal, the Spark Classic is an excellent option for average credit.
3. Apply for a Secured Credit Card
If average credit cards are out of reach, consider a secured credit card. These cards are meant for people with bad credit, and require an upfront deposit, usually equal to your credit line. This deposit doesn’t count toward your balance—instead, it’s held as collateral in case you default.
If you’re wondering why you should give an upfront deposit on a credit card—which, after all, is a loan—secured cards have a purpose. On-time payments and responsible use are reported to credit rating bureaus, and help you build up your FICO score and eventually graduate to a regular (unsecured) credit card.
One of the best unsecured cards out there is the Discover it® Secured Card–No Annual Fee, which offers rewards as well as no yearly charge. You earn 2% cash back on up to $1,000 spent per quarter on gas and restaurants, and an unlimited 1% cash back elsewhere. Discover also doubles your first year’s rewards earnings on your first account anniversary. This is a personal credit card but a great option for rebuilding your own credit.
The BBVA Secured Business Credit Card is one of the few secured business credit options out there. Its $40 annual fee is waived the first year, and you earn 1 BBVA CompassPoint on every $1 spent on qualifying purchases with bonus rewards on the category of your choice.
Unlike the Discover card, you get business-specific perks like accounting help and free employee credit cards. If you don’t want the card balance and payment history to impact your personal credit score, or you want employee cards, or you plan to upgrade to an unsecured card before the $40 annual fee kicks in, this may be a solid alternative to the Discover it.
How Can I Build My Business Credit History?
The first step to building a business credit history is applying for an employer identification number (EIN). This is an IRS designation that is equivalent to a consumer’s social security number, and it’s available to businesses located in the U.S. or its territories meeting a very loose set of criteria (like having employees or operating as a business or partnership).
You can use your EIN on business credit card applications to build up your reputation with business credit reporting bureaus. You can also gain credibility by working with vendors that report to those bureaus and ensuring that all your business’ accounts and finances include the official business name.
A strong business credit history takes time, patience, and financial stability, but if you can establish a good track record, you’ll find it much easier to qualify for loans.
Does a Business Credit Check Hurt My Personal Credit Score?
A business credit card’s impact on your credit score varies by bank. Some—like Capital One and Discover—report all usage to personal credit bureaus. Others, like Chase and U.S. Bank, report only if your account is seriously delinquent (American Express only reports negative information). Finally, BBVA, Bank of America, Wells Fargo, and Citibank won’t report your usage at all.
If you’re worried about your business credit card hurting your own FICO score, you might want to choose a bank that isn’t likely to report usage. However, if you’re sure you can make on-time payments and want to build up your personal credit, you might want to choose a bank that always reports to personal credit bureaus.
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