What to know about building credit with business credit cards
Quick insights
- Many business credit card issuers report to commercial credit reporting agencies, which may help you build your business’s credit score.
- Check the card’s terms or contact the issuer to confirm if card activity is reported to business credit bureaus.
- Provide your Employer Identification Number (EIN) on the credit card application to help facilitate proper reporting to these agencies.
As you work to grow your business, building your business’s credit score may be a priority. A high credit score could potentially lead to better terms on loans or payment terms with vendors. Business credit cards can be a step toward establishing and building your business’s credit score—but only if the credit card issuer reports to the commercial credit bureaus.
When searching for the right credit card to meet your business’s needs, you may want to consider the card’s credit reporting policy alongside its terms and features. Read on to learn more about how to build credit with business credit cards.
How business credit cards can help with building credit
Business credit cards can help you build your business’s credit identity. Many business credit cards report to at least one of the business credit bureaus, such as Dun & Bradstreet, Experian Business and Equifax Business.
If you’re approved for a business credit card that reports to these agencies and make smart financial choices when using the card, it can contribute to building your business credit score. However, keep in mind that multiple factors impact your business’s credit score.
A high business credit score signals your business’s creditworthiness to lenders, potentially helping you access lines of credit with favorable terms and interest rates. Additionally, some suppliers and vendors may offer better payment terms if your business maintains a good credit score. For example, a good credit score could result in a technology provider offering better leasing terms on equipment.
Note that even with a high business credit score, lenders may still consider your personal credit score when determining loan eligibility and interest rates.
Tips for building business credit with credit cards
Making informed choices when using a business credit card could positively impact your business credit score. Of course, many factors influence your business credit score, and raising this score often requires a holistic approach to managing your business’s financial practices.
Here’s are some ways you can use your business credit card to help establish a good business credit score:
- Paying your credit card balance in full at the end of each billing cycle may help keep a low credit utilization ratio—the ratio of credit you’re using compared to your total available credit—which is one factor in your credit score.
- Because your payment history affects your business credit, making on-time payments may be beneficial.
- If your personal income or business revenue increases and you have a strong payment history on the credit card, it may be worth it to request a credit limit increase, which could further improve your credit utilization ratio.
Selecting business credit cards to build credit
While many factors typically go into selecting a business credit card, you may want to consider the following questions as you choose the right one for your business’s needs:
- Does the credit card issuer report to business credit bureaus? This information is typically available in the credit card’s terms or by contacting the issuer’s customer service line.
- What are the fees and interest rates? These factors determine the cost of borrowing on a credit card. High interest rates and fees could affect your ability to make regular, on-time payments, potentially impacting your business credit score negatively.
- What credit limit are you likely to receive? A higher business credit card limit than you need may help you better manage your credit utilization ratio.
While you won’t know the exact interest rates or credit limit you’re eligible for before applying, you can often get a general idea. Some credit card issuers provide ranges for these rates and limits in the card’s terms. Another option is to review any pre-qualification offers you receive, which typically include these details.
Beyond the card features that can impact your business credit score, you may want to consider whether the rewards and benefits match your business’s spending habits.
Applying for business credit cards
The information you provide on your application can affect whether the card activity is properly reported under the name of your business. You’ll need to include your business’s EIN—a unique 9-digit number assigned by the IRS that identifies your company as a business—on the business credit card application for accurate reporting to business credit bureaus.
Unless you’re applying for an EIN-only credit card—a type of business credit card typically reserved for corporations with high annual revenue—you’ll also likely need to provide your Social Security number (SSN) and sign a personal guarantee. A personal guarantee means you are personally liable for the credit card balance.
Keep in mind that your card activity may still be reported to consumer credit bureaus even if the account is associated with an EIN as some credit card issuers report card activity to both consumer and commercial credit bureaus.
In summary
A business credit card can be a step toward building your business’s credit score. As some credit cards don’t report card activity to business credit bureaus, it may be helpful to check the card’s terms or call the issuer to understand their reporting policy.
After selecting a business credit card, include your business’s EIN on the application for accurate reporting to these agencies. If approved, making on-time payments and maintaining low credit utilization on a business credit card may positively impact your credit score.
