Tuesday, April 16, 2024

Here are 5 Mistakes to Avoid When Applying For a Business Credit Card

As a business owner, you know that it’s important to have a good credit history. Timely payments and utilizing no more than 30% of the credit limit on your business credit card is one way to help build your credit history and improve your credit score.

That said, your business credit card application might get rejected due to reasons such as not providing the right documents and missing the deadlines. This is why it is imperative to know common mistakes business owners often make that lead to their credit card application cancellation. Avoid these five mistakes.

Not Checking Your Personal Credit Score

Checking your personal credit score will give you an idea of where you stand and if you need to take steps to improve your credit before applying for a business credit card. 

Here’s how you can check your credit score:

  • Pull your credit report from a site like AnnualCreditReport.com. 
  • Look for a credit monitoring service. There are popular websites that provide free credit scores and credit reports.
  • Check with your bank or credit card issuer. Some banks and credit card issuers now offer free credit reports to their customers.

If you have a good personal credit score, you’re more likely to be approved for a business credit card with a higher credit limit. You can use the credit card at businesses that accept credit card payments to pay for your business expenses. 

Applying for a Business Credit Card Without a Personal Guarantee

Suppose you’re a business owner with good personal credit. In that case, you may be able to qualify for a business credit card without a personal guarantee. Such a guarantee means that you’re personally liable for the debt if your business can’t pay it back.

While some business credit cards don’t require a personal guarantee, most do. If you’re not willing to provide a personal guarantee, you may have to look for a business credit card that doesn’t require one.

Applying for a Business Credit Card With Poor Personal Credit

If you have poor personal credit, you may still be able to get a business credit card, but it will likely have a lower credit limit and a higher interest rate. You may also be required to provide a personal guarantee.

Some steps to improve your credit before applying for a business credit card include:

  • Paying your bills on time
  • Keeping your balances low
  • Not opening new lines of credit unnecessarily.

Applying for a Business Credit Card Without a Business Plan

When you apply for a business credit card, the issuer will want to see that you have a solid plan for how you’ll use the credit line. They’ll also want to see that you have the ability to repay the debt. To increase your chances of being approved, be sure to have a well-thought-out business plan that includes using the credit line and how you’ll repay the debt.

Applying for a Business Credit Card Without a Personal Credit Check

When applying for a business credit card, the issuer will want to see your personal credit history. This is because they want to know if you’re a responsible borrower. So make sure you have a copy of your personal credit report before applying.

Final Word

Applying for a business credit card can be a great way to get the credit you need to grow your business. But it’s important to avoid making mistakes that could hurt your chances of being approved or limit the credit line you’re offered.

Still have questions? Ask us in the comments section. 


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