How to get a business credit card with bad personal credit

You probably know about personal credit and how it plays a role in qualifying for loans and getting better interest rates. Well, business credit is similar. It gives lenders an idea of a company's financial history.

Having strong business credit increases your chances of getting approved for loans and financing with better terms and rates. However, personal credit can affect business credit. If you have a poor personal credit history, it can be challenging to build business credit. Lenders may take personal credit into account when assessing the financial risk of your company and deciding whether to issue you a business loan.

In this article, we'll show you how to build business credit with bad personal credit, giving your company more financial opportunities. We'll also guide you on finding credit card options that you can qualify for even with less-than-good credit, and we'll explain how to successfully apply for one.

How does personal credit affect business credit?

When lenders review a company's loan application, they need to consider the entire financial picture to assess the risk of investing in that company and the likelihood of repayment. While personal credit doesn't always directly reflect a company's reliability in repaying loans, lenders sometimes have limited information, especially for small businesses with little or no established business credit. As a result, a personal credit check becomes part of the assessment.

Small business owners with low personal credit scores may struggle to obtain loans, or they may receive less favorable interest rates. You can get approved for a business card with bad credit, but you will have limited options.

Can I get a business credit card without using my personal credit score?

Yes, if you’ve established strong business credit, then you can get some business credit cards without using your personal credit score. However, most small-to-mid-sized businesses won’t have the business credit history required to take advantage of this option. In that case, your other two options are a corporate card or a secured credit card.

Can I start a business with bad personal credit?

If you need a loan to finance your business, it will be hard to get one with bad credit. However, if you already have some startup capital and want to get started, you will probably be able to qualify for some credit cards. Or, consider getting a secured card to help you start building business credit. That way, you’ll have an easier time applying for loans later on.

What credit score is required for a business credit card?

Personal FICO scores range from 300 to 850, while business credit scores generally range from 0 to 100. To get a business credit card and build your business credit, credit card issuers typically require a good personal credit score, often defined as higher than 670.

Can I get a business credit card with a 500 credit score?

While a credit score of 670 or higher is considered good, you can still get a business credit card with a credit score around 500. The best business credit cards for you will look at other factors, like your business’s revenue, to determine your eligibility. Ramp is one example of a card that doesn’t require good credit, since we don’t factor in your credit score.

How can you build business credit with bad personal credit?

Having bad personal credit doesn't mean you can't build business credit. Here are steps you can take to work toward this important financial goal:

1. Officially establish your business

Your first step is to formally establish your business as a separate entity. Incorporate your company as an LLC, S-Corp, or C-Corp and register it with the government to obtain an employer identification number (EIN), which acts as a social security number for businesses.

2. Open a business bank account

Separate your personal and business finances by opening a business bank account. This protects you from personal liability related to business expenses and keeps your company's financials separate from your personal finances. It also helps establish a relationship with the bank.

3. Consider trade credit

Obtain lines of trade credit to build business credit. These short-term, business-to-business lines of credit allow you to purchase goods or services from vendors and pay later. Trade financing helps build credit, but make sure you choose a vendor that reports your payment history to credit bureaus, as not all vendors do.

4. Take out a revenue-based loan

Consider revenue-based financing for your company. This approach depends more on revenue than credit scores. Lenders receive a percentage of your gross revenues in exchange for providing capital.

5. Apply for a business credit card

Using a dedicated business credit card can help build your business credit, even if your credit history is poor. It’s best practice to keep business expenses off your personal credit card.

Be aware of your provider’s interest rates, balance transfer rates, and annual fees to make sure you can manage on-time payments.

6. Make all payments on time

Whichever financing options you choose, ensure that you pay all bills on time. This helps develop a strong payment history and build your company's credit.

How does monitoring your business credit work?

Monitoring your business credit closely is crucial for improving your company's financial standing. Sign up with one of the three main business credit bureaus—Dun & Bradstreet, Experian, and Equifax—to receive regular reports. These credit reports help you keep track of your company's finances and monitor your creditworthiness.

If you're dissatisfied with your business credit score, don't get discouraged. You can improve your business credit history by paying bills well before their due dates and keeping an eye on your credit utilization rate. This rate is the ratio of your balance to your credit limit. Aim to keep your balance below 30% of your credit limit to demonstrate responsible credit use. This leads to a better credit profile and more financing options.

Like personal finances, always stay vigilant and make informed financial decisions to save money and prepare for your company's future. Establishing positive credit habits requires effort, but it pays off in the end.

How can you find a business card you qualify for when starting with poor credit?

As mentioned, small business credit cards are an excellent way to build business credit. Fortunately, there are cards available to business owners with poor personal credit. You just need to do a little research.

Secured business credit cards usually don't have strict personal credit requirements, but you have to pay a security deposit equal to the card's credit limit. As you build your credit, you can work towards qualifying for an unsecured business credit card that doesn't require a deposit. However, these cards may ask for a personal guarantee, making you personally liable for the company's payments and financial obligations.

When applying for business credit cards, you'll need to provide your business name, address, EIN, number of employees, and solid financial records that document your company's revenue and your personal income. Ideally, these records will show growing revenue and earnings, low credit utilization, and other positive business practices.

Additionally, there are startup business credit cards that don't require a credit check or a personal guarantee, including Ramp's corporate card. Ramp determines eligibility and credit limits based on your company's revenue. The application process is simpler, and cardholders gain access to expense management software. Ramp also reports to credit bureaus, helping you build your credit score in the process.

You can get 1.5% cash back on all purchases and build business credit with Ramp’s corporate cards.