Business credit cards offer small business owners access to a flexible line of credit along with a convenient and safe way to pay for business expenses. Many offer cash back rewards and other perks. But if your credit scores aren’t high you may find it more difficult to qualify. Here we’ll discuss how to find and qualify for business credit cards for bad credit.
In a Federal Reserve Bank of Chicago study, over 97% of businesses with poor or below-average financial health were unable to access traditional business bank loans or financing, so it’s no surprise that many business owners look to credit cards or lines of credit to access working capital. Secured business credit cards or small business credit cards for poor credit can be good options for business owners with poor or fair credit who need a small amount of capital now. Even with a low credit limit, these cards can help you build business credit.
First, let’s clarify what qualifies as “bad” credit. Most business credit card issuers require good to excellent credit. That often means a 680 FICO score or above. A few, however, are more flexible and may allow personal credit scores in the mid-600s or lower. There are limited business credit card options for business owners with bad credit, so we’ve included credit cards for fair credit here as well.
Do Business Credit Cards Check Personal Credit Score?
Yes. Even though you use business credit cards for business purposes, financial institutions look at your personal credit score to determine if you qualify. The process often requires what’s called a hard credit check, which shows up on your personal credit report and may lower your credit score by a few points.
However, you can also establish business credit scores. This score represents your business as a separate entity and its ability to repay what it owes. We discuss how to establish business credit later in this article.
Some business credit cards also report the activity on your business credit card to consumer credit bureaus. Thus, signing up for a business credit card to take advantage of the great rewards program or balance transfer rates may end up impacting your personal credit score. It’s helpful to keep this in mind when shopping around for a business credit card.
If your personal credit score isn’t quite where it needs to be to get a top-of-the-line business credit card, you still have options. We explore your best choices for business credit cards for bad credit below.
The Best Business Credit Cards for Bad Credit
Here are credit cards to consider if your credit scores aren’t strong:
Best credit card for limited credit:
Theis a popular card for those with less than perfect credit.
- annual fee
- High interest rate
Themay be a good fit for businesses that want to build credit.
Secured Business Credit Cards
A secured business credit card is another option for business owners with bad credit. These are much easier to qualify for than unsecured credit cards. A secured card requires a cash deposit to be held as a security deposit. (Typically you’ll get it back when you close the account.) This is a way for credit card companies to minimize the risk of a high risk borrower. Secured cards usually allow borrowers to charge up to the amount of their security deposit, though some will let your balance exceed your credit limit if you manage it responsibly.
Best personal secured card:
While the focus here is on business credit cards, a personal credit card may help you build credit if used properly.
- On time payments can help build credit
- Access to your free FICO score online
- No rewards or intro offer
Theis a no annual fee credit card that can help with building credit when used responsibly. A security deposit (minimum of $200) is required. Once approved, your credit limit will be equal to your security deposit. With Citi’s Flexible Payment Due Dates, you can choose any available due date in the beginning, middle or end of the month, then manage your account 24/7 online, by phone, or in the mobile app.
Best low-cost secured card: Wells Fargo Business Secured Credit Card
The Wells Fargo Business Secured Card is a low-cost business secured credit card with an option to graduate to an unsecured card.
- Rewards: Choose between cash back or rewards points.
- Low interest: Prime rate + 11.90% APR on purchases
- Build business credit: Wells Fargo reports your payment and usage behavior to the Small Business Financial Exchange.
- You must open a Wells Fargo business checking or savings account prior to applying.
The Wells Fargo Business Secured Credit Card allows cardholders to secure a credit line between $500 – $25,000, depending on how much you are willing to deposit. With this card, the amount of your credit line is equal to the amount you deposit. There is no annual fee. And best of all, you may be eligible to upgrade to an unsecured credit card over time.
This card offers a choice of rewards:
- Cash back: 1.5% cash back on eligible purchases or
- Points: 1 point on every $1 spent and receive 1,000 bonus points every billing cycle when you spend at least $1,000 on qualifying purchases 1 point for every dollar spent:
*All information about the Wells Fargo Business Secured Card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.
How Do I Establish Business Credit?
Although you likely don’t need an established business credit score to get a small business credit card, having business credit can help your business succeed in many ways. For example, a good business credit score can open business funding opportunities that you couldn’t have accessed without it. It may also allow you to get more agreeable payment terms with your suppliers and vendors, which can make payments less of a hassle for your business. Additionally, if your goal is to work with a Fortune 500 company or a government agency, these institutions will check your business credit to make sure you’re a legitimate business before signing on the dotted line.
The easiest way to establish business credit is to use Nav. Create a Nav account to access our Business Boost or Business Loan Builder plans. These accounts come with an important feature called tradeline reporting. With tradeline reporting, we send positive payment information to the major credit bureaus that track businesses, which provides proof that you pay your bills on time. This may help build your business credit with the different bureaus. And because we understand life happens, we never send negative information like late or missed payments.
Some business credit card accounts also have tradeline reporting for their cardholders, but this feature is not universal. So it’s not guaranteed that using a business credit card will automatically establish business credit. If possible, choose a credit card that will report to the major business credit bureaus.
We put together a list of vendors that offer tradelines to their customers. You can read the article here.
Can I get a business credit card with bad personal credit?
If your credit scores are low it will be harder to qualify for a business credit card. You may need to start with a card with a smaller credit limit, and in some cases you may need to work on your personal credit scores before you can qualify. If your credit scores are low, you may need to stick with personal cards while you rebuild your credit.
Does opening a business credit card affect your credit score?
Any hard inquiry into your personal credit can lower your credit score by a few points. However, the effects are typically short term and shouldn’t cause your score to decrease for more than a few months. However, opening several new credit accounts (like credit cards, loans, or lines of credit) within a short period can affect your credit score. So it’s best to try to space out your new accounts as much as you can.
How to choose the right business credit card with bad credit
Because your choices will be more limited if your credit scores are low, you will primarily look for a business credit card that will allow you to establish a payment history. Rewards rates and perks are typically less important than simply finding a card for which you can qualify. Some small business credit cards report to personal credit, some card issuers report to business credit bureaus, and some report to both. On-time payments and low balances can help build good personal and business credit scores.
What does it take to qualify for a business credit card with bad credit?
There are two primary qualifications most business credit card issuers consider:
- Income or revenue
Credit: In most cases, a personal credit check will be required— even for business credit cards. It’s a good idea to check your credit reports and scores from the major consumer credit bureaus— Equifax, Experian and TransUnion— so you understand your creditworthiness. (There are more than 138 places to get your credit score for free.) This can also help you identify problem areas in your credit history where your credit can be improved. For example, high debt utilization is often a problem for consumers and business owners. If your debt ratio is too high, it could be weighing on your scores, and you’ll want to focus on paying down those balances.
In addition to minimum credit score requirements, some issuers will not approve your application if you have too many recent inquiries, high balances on other credit cards or no credit history.
Income: Issuers will often have minimum income requirements (and they may not disclose those) but the good news is that most will allow you to include income from all sources and not just the business. That means these cards may be available to startups as well as more established businesses.
How to apply for a business credit card with bad credit
Unless you get appealing credit card offers in the mail, you’ll most likely shop for a credit card online. Most issuers make it easy to apply online and get a decision very quickly. You’ll want to have the following information handy when you apply:
- Your Social Security Number
- Employer Identification Number (EIN) or Taxpayer Identification Number (TIN)
- Business information: address and phone number
Note while a few issuers require you to have a formal business entity (such as an LLC or S corp) to apply for most business credit cards, in most cases these cards are also available to sole proprietors, independent contractors and freelancers.
If you get rejected for a card you want, you may want to reach out to the card issuer. Some have a reconsideration department that will review your application to determine whether there are other factors that may help you qualify.
Can I use my EIN to get a credit card?
If you have an employer identification number (EIN) you may need to supply it when you apply for a small-business credit card. But you will almost always need provide a Social Security number as well.
How to get a business credit card with bad credit
The most important thing to keep in mind when you apply is to narrow your search to cards for which you are most likely to qualify. Applying for multiple cards in a short period of time can result in multiple credit inquiries on your report. These can impact your credit scores, so be careful to apply for cards for which you’re more likely to get.
If you get a business credit card, try to use it for business purchases so you can separate your business and personal finances. This will make it easier to keep track of your business spending for tax purposes.
Alternatives to business credit cards for bad credit
Many traditional small business loans (such as bank loans or SBA loans) require good credit, but there are some types of business financing that may be more credit flexible or may not check personal credit at all. Lenders that make business loans for bad credit tend to be heavily focused on other factors such as revenues or time in business. They include:
- Vendor accounts
- Online loans
- Business cash advances
For the above types of financing, revenues may be more important than credit history. A business bank account may be required so make sure you open and use one as soon as possible.