How to Get a Business Credit Card With Bad Credit
As a business, you need credit cards for a number of reasons. You can have access to a flexible line of credit along with a convenient and safe way to pay for business expenses. Many offer cashback rewards and other perks. But if your credit scores aren’t high you may find it more difficult to qualify. Does this all hope is lost?
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.
- What is Bad Credit?
- How do I Get Business Credit With Bad Credit?
- How Can I Build my Business Credit Score?
- What Are The Best Business Credit Cards For Bad Credit?
- Can I Get Approved For a Credit Card With a Score of 500?
- How Can I Raise my Credit Score 200 Points in 30 Days?
What is Bad Credit?
On the FICO® Score☉ 8 scale of 300 to 850, one of the credit scores lenders most frequently use, a bad credit score is one below 670. More specifically, a score between 580 and 669 is considered fair, and one between 300 and 579 is poor. The table below offers more detail on where scores fall.
|FICO® Score Ranges
|300 – 579
|580 – 669
|670 – 739
|740 – 799
|800 – 850
VantageScore®, another credit scoring model which was developed by the three main credit bureaus (Experian, TransUnion, and Equifax), also uses a scale ranging from 300 to 850. But the definitions associated with each score range vary slightly. A VantageScore from 601 to 660 is considered fair, from 500 to 600 is poor, and from 300 to 499 is very poor. See the table below for a full breakdown.
|VantageScore 3.0 Ranges
|300 – 499
|500 – 600
|601 – 660
|661 – 780
|781 – 850
The higher your credit score, the more likely you are to qualify for credit and at better interest rates and terms. If your score is low, it can be difficult to obtain affordable credit or to get approved for a loan or credit card at all.
Read Also: 7 Ways to Improve Your Credit Score
You can think of maintaining good credit as preventive medicine. You don’t know when something might come up, like a breakup that means having to find a new apartment fast, but good credit can help you handle any affliction with less hassle.
A bad credit score can lead to these roadblocks:
- Potential rejection for loans and lines of credit. These can include mortgages, car loans, personal loans, private student loans, some federal student loans for parents and graduate students, and credit cards.
- Difficulty getting a rental application approved. Many landlords conduct credit checks to evaluate your payment history, with an eye to whether you’re likely to pay rent on time.
- Required security deposits. Utilities including gas, electricity, and water may require you to make a security deposit when moving into a new home.
- Trouble getting a new cell phone contract. Many wireless providers check credit before taking you on as a customer, though some carriers offer prepaid plans and other arrangements that don’t require a credit check.
- Issues during an employment background check. Employers may view a limited version of your credit report as part of the background screening process. They may want to confirm the information on your application or evaluate how you handle money if you’re applying for a financial management role. They won’t see your credit score, but activities that lead to a poor score—such as missed payments—will be evident on your credit report.
- Higher insurance premiums in some states. Car insurance companies, for example, often use information from your credit report, in addition to your driving history, to assess your potential risk of submitting a claim. Your credit history cannot be factored into insurance rates in California, Hawaii or Massachusetts.
How do I Get Business Credit With Bad Credit?
Although you can use a personal credit card for your business, it’s better to get one specifically for your company. They offer benefits that are designed to help business owners do everything from handling their enterprise’s expenses to helping with accounting.
Just be aware that these cards remain your personal responsibility. Even if it’s in your business’s name, you will be on the hook for all payments and any outstanding debt.
So, how can you get a business credit card with bad personal credit? When your scores are at least in the “good” range, start looking into business credit card options. As you’ll see, there are many, so give this task plenty of time.
Even if your credit is bad, you have options. There are some good business credit cards for people with bad credit.
Be aware that some business cards are charge cards while others are credit cards. With a charge card, there is no preset limit, but you’ll need to pony up the entire balance within about 30 days. With a credit card, there is a maximum amount you can charge, but you can pay at least the minimum requested payment and then revolve the rest. Ultimately, you may want one of each.
Almost all business cards have rewards programs attached to them, so read over the program’s details and focus on those you’ll use. For example, if you think traveling will be in your future, concentrate on a card that gives you the best perks for flights, airport amenities, hotels and car rentals.
Many business credit cards offer excellent sign-up bonuses, too, where you would receive a large number of points, cash or miles after spending a certain amount with the card within a few months of activation.
Some also offer 0 percent APRs for a fixed number of months, which will give you a nice amount of time to pay for your venture’s needs before financing fees are assessed. As long as you pay the debt in full before the real rate begins, you get a free loan! As you use the card, you’ll be racking up rewards.
These programs differ, so make sure it’s a good match. One card may offer an exceptional reward value for restaurant meals, while another gives the most for things like office products.
Finally, prepare for annual fees. Not all cards charge them, but if you get more out of the account by way of perks and rewards, you’ll come out ahead. Choose wisely.
How Can I Build my Business Credit Score?
Since your business has yet to begin, you don’t have a business credit profile that can help you qualify for credit products. Therefore, lenders will assess your personal creditworthiness to determine qualifications and set terms.
To know what is dragging your credit scores down, pull your credit reports up. You can get a report from each of the three credit reporting agencies—Experian, TransUnion, and Equifax—once a year for free from annualcreditreport.com.
The information listed in the sections for trade lines, public records and credit inquiries of your credit report is all inputted into scoring models, so read your reports carefully. If you spot any inaccuracies, file a dispute with one of the credit reporting agencies. The one you use will notify the other two, and your files will be updated.
To improve your scores (even when the negative data is still being listed):
- Pay all credit accounts on time. Although late payments hurt credit scores (especially when there are many, or accounts are seriously delinquent), establishing a perfect payment history from this point forward will help mend the damage.
- Reduce credit card debt. If you have credit cards and they’re maxed out, reduce the balance to well below the credit limit.
- Open up a credit card. Consider opening a personal credit card. There are many credit cards created for people with bad credit. Once you have it, choose a small bill to charge each month, then pay it off in full and on time.
- Add utility and cell phone accounts to your report. The more on-time payments you have on your credit report, the better. Experian has a free Boost program where you can add non-credit accounts to your file. Those payments should help give your FICO 8 credit score at least a few extra points.
With this strategy, you can build your credit over time.
What Are The Best Business Credit Cards For Bad Credit?
Here are credit cards to consider if your credit scores aren’t strong:
1. Capital One® Spark® 1% Classic for Business
The Capital One® Spark® Classic 1% for Business is a popular card for those with less than perfect credit.
- Unlimited 1% cashback on every purchase with no minimums or expiration date
- No annual fee
- High-interest rate
The Capital One® Spark® 1% Classic for Business may be a good fit for businesses that want to build credit. Benefits include 0% fraud liability protection, no foreign transaction fees, free employee cards, and no spending limit.
2. 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 cashback 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:
- Cashback: 1.5% cashback 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:
3. Citi® Secured Mastercard®
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
The Citi® Secured Mastercard® is 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.
Can I Get Approved For a Credit Card With a Score of 500?
Whether you are a student or an entrepreneur looking to expand your business, you can find an unsecured credit card that meets your needs for building credit. There are various types of unsecured credit cards that offer different benefits and terms. Finding the right one for you is a matter of comparing and analyzing the possible offers based on important factors, such as the:
- Required security deposit
- Interest rate
- Annual, monthly, and one-time fees
- Credit limit
- Minimum monthly payments
- Rewards system
Some unsecured credit cards reward users for making their payments on time through a point system. In turn, card holders can use these points to redeem free items or discounts on food, airlines, or hotels. Other credit cards offer low introductory APRs and don’t require that you pay an annual fee. It’s even possible to find an unsecured credit card that doesn’t require a credit check. But, it’s important to note that credit cards that don’t require credit checks have large interest rates. To be safe, you should always familiarize yourself with the terms of credit cards.
1. Chime Credit Builder Visa
The Chime credit builder visa is currently one of the best ways to quickly rebuild your credit. On their website they say their card can increase your credit score by an average of 30 points. It’s also a no brainer from a cost perspective because the card has no annual fee, no interest, no minimum security deposit, and there is no credit check to apply.
2. Citi Custom Cashsm Card
The Citi Custom Cash credit may be a good option for people with not so high FICO scores. We’ve read reports of some people getting approved with scores in the high 500s. It offers amazing benefits for a card in this class with up to 5% cash back in certain categories and unlimited 1% cash back on all other purchases.
3. Applied Bank® Unsecured Classic Visa® Card
By using the Applied Bank® Unsecured Classic Visa® Card responsibly, those with bad credit can steadily improve their credit score. To open this unsecured credit card, you will have to pay several non-refundable fees, including a one-time fee of $89. Additionally, the annual fee starts at $75 and lowers to $45 in the second year. However, you can enjoy your entire first year with the card free of monthly charges. In the second year, this monthly charge then increases to $6.25 and continues on for all subsequent years. Even though the fees are steep, this card does not require a security deposit.
4. Fit Mastercard® Credit Card
With its easy application process, you can get approved for the Fit Mastercard® Credit Card quickly. However, you must first prove that you have a checking account. You will also need to pay a rather high one-time fee of $89. Although the card does not require you to pay monthly fees in the first year, you will have to pay an $99 annual fee every year that you have the card.
One of this card’s benefits is its 25-day grace period. This means that you have 25 days to make a payment before interest builds. Additionally, your credit information will be analyzed monthly, giving you the opportunity to consistently improve your history.
5. Indigo® Mastercard® for Less than Perfect Credit
The Indigo® Mastercard® for Less than Perfect Credit offers great benefits. One of the best features of this card is its option to pre-qualify. This means that without affecting your credit score, you can inquire about the likelihood of approval before actually submitting an application. Additionally, depending on your credit history, you may be exempt from having to pay a recurring annual fee.
However, the potential maximum annual fee for this card is $99. Although this is a hefty annual fee, it’s the only recurring fee that you will have to keep in mind. The Indigo® Mastercard® for Less than Perfect Credit does not have a one-time or monthly fee, which will help you save money to focus on building your credit.
With its $300 credit limit, this car doesn’t give you extra room for emergency purchases. But, it does offer a 25-day grace period and an interest rate of 24.9%, which is the lowest interest rate of all the unsecured credit cards on this list. Additionally, with this credit card, you will have 24/7 online access to your account so that you can responsibly monitor your spending. In the event of a lost or stolen credit card, which can negatively affect your credit, you will receive protection against fraud.
How Can I Raise my Credit Score 200 Points in 30 Days?
Everyone’s credit history and credit rating are different, so it’s difficult to say for sure how long it will take to raise your credit score by 200 points.
However, if you follow the right strategies, you’ll see noticeable improvement somewhere between a few months to a year. We weren’t satisfied with that estimate, though, so we decided to narrow it down.
1. Get More Credit Accounts
One common cause of a low credit score is a “thin credit profile”. That means you don’t have enough activity in your credit report for lenders to have confidence in you.
If you’re a recent college graduate who didn’t take on student loan debt or credit card debt in college, you’ll probably have this issue. The best way to address this is to open up a new account. This can be a credit card, credit builder loan, personal loan, or mortgage.
The positive effects of acquiring multiple new accounts are two-fold:
- Adding new accounts increases the diversity of your credit mix
- Building a positive payment history with multiple credit accounts has a more significant impact than just one account
It can be hard to qualify for new credit when you have a low credit score or no credit history. To be successful,target more accessible accounts. A good way to get started can be a secured credit card or a credit builder loan.
A secured credit card requires an upfront cash deposit, usually equivalent to its credit limit. They’re much easier to qualify for since the lender can keep the deposit if you fail to pay your balance.
A credit builder loan follows a similar strategy. The lender will hold onto the loan amount until the final payment goes through. Once the loan balance and interest are fully paid off, the funds are released to the borrower.
That’s the opposite of a typical installment loan. But its purpose is very different. Credit builder loans help establish good payment history for people with no credit history, thin credit history, or a history of poor credit.Credit Strong’s accounts are great examples of a credit builder loan. You establish payment history with all three major credit bureaus, then get the loan funds at the end.
Whichever accounts that build credit you choose to open, make sure you can afford them. The last thing you want is to overextend yourself and miss a monthly payment.
2. Pay Down High Credit Card Balances
Opening more credit accounts is a great way to improve your credit score over a couple of months because it doesn’t require a large chunk of money upfront. Paying down your credit card balances, on the other hand, can have a longer-term project.
If your credit cards are maxed out, then paying them down will improve your financial situation and your credit score rapidly. Credit utilization is an important credit scoring factor, so using more than 30% of your available credit hurts your credit score.
There are two common approaches people use to pay off their debts over the long term:
- The debt snowball method: Pay off your accounts in order of lowest to highest outstanding balance.
- The debt avalanche method: Pay off your accounts in order of highest to lowest interest rate.
The debt snowball is widely considered a more satisfying approach. It helps some people feel like they’re making progress by paying off accounts in full.
However, the debt avalanche method will save you more money. If you have an account that’s accruing interest at a much higher rate than the rest, it would make sense to tackle that one first, regardless of the account balance.
Here’s a quick example. Imagine that you have three credit cards with balances of $500, $2,000, and $5,000. Their interest rates are 18%, 20%, and 25%, respectively.
If you took the debt snowball approach, you’d target the credit card with the $500 balance first and pay it off quickly.
If you took the debt avalanche approach, you’d target the credit card with the $5,000 balance first. It’s interest rate is 5% – 7% higher than the others, but it would take you ten times as long to get the satisfaction of paying it off.
Truthfully, the difference in savings between the two is likely to be negligible. It’s usually much more important to stick with the process and pay off your debts than to do so in a specific order.
Paying off accounts isn’t the only way to feel like you’re making progress. You can also measure your progress with a metric called your credit utilization ratio. To calculate it, divide all of your outstanding credit balances by your total credit limit.
Lenders do so as part of their lending process a.k.a. underwriting, so it’s a helpful metric to know. In general, a lower utilization ratio is best.
Under 30% is good.
Below 10% is even better!
Focusing on reducing your total credit utilization ratio can help give you a sense of progress even if you’re not paying off entire accounts very quickly. That way, you can have the best of both approaches.
3. Always Make On-Time Payments
Payment history is the most significant factor in your FICO score. Even if you do well in all of the other factors, a poor payment history will leave your credit score in shambles.
Your payment history makes up 35% of your FICO Score 8, the most frequently used credit score. That’s equal to the weight given to the length of credit history, new credit activities, and credit mix combined!
So do whatever you can to make sure your payments are always on time. Here are some tips:
- Build an emergency fund with at least a few months expenses.
- Avoid spending more on your credit cards than you have in cash.
- Don’t take out any loan with monthly payments that you’ll struggle to repay. Stay within your budget!
- Set up automatic payments for your credit cards and installment loans.
If you follow the strategies above, you’ll improve your credit profile and credit score..