Get a Business Credit Card With Bad Credit

Getting a credit card for your business can be difficult if your credit score is low. Lenders prefer a robust credit score which usually indicates that the borrower will be able to meet payments. However, even if your credit score is low, you can still obtain a credit card for your business expenses and work to improve your credit over time.

Steps

Searching For The Right Credit Card

  1. Look for cards that are labeled “secured credit”. “Secured credit” cards can be a good option for those whose credit score prevents them from getting other lines of credit. Credit cards that have “secured credit” require a deposit and certain fees as security against any credit that the card is used for.[1]
    • Security deposits and fees must be paid in order to obtain a “secured credit” card.
    • You approved line of credit is the amount of your security deposit.
    • Some “secured credit” cards can have large fees.
  2. Try to get a low limit card. Generally the higher the amount of credit a card allows, the higher your credit score will have to be in order to be approved for that card. Finding a credit card with a low line of credit can increase your chances of obtaining a business credit card while having a low credit score.[1]
    • The credit line will usually be between $300 to $500 on a low limit card.
    • Low limit cards should be used as a last resort due to their high set up fees.
  3. Consider details of the card. Before you finalize and accept a credit card that you have found, carefully review the details of the card. By carefully examining the details of the card you will be able to learn if the card is right for you and your business needs.[2]
    • Makes sure the interest rates are acceptable.
    • Evaluate your ability to pay any bills once you use your card.
    • Check to see if the card offers any awards such as cash-back or travel benefits.
  4. Look into business charge cards. Business charge cards may be easier to obtain with bad credit as they require you to completely pay off the balance every billing cycle. Since there is no balance that can accumulate beyond one billing cycle, creditors may be more inclined to offer you a business charge card.[3]
    • American Express and Diner's Club both have charge cards available to apply for.
    • Charge cards need to paid off fully at the end of each billing cycle. However, they do work to build up a positive credit history if you pay them on time.
  5. Ask your bank or credit union about a business credit card. If you currently work with a bank or credit union, or have an existing account with them, you can ask them if they are willing to offer you a business credit card. Having a history as a customer or member with your bank or credit union can increase your chances of being approved for a business credit card with them.[4]
  6. Consider working with a financial consultant. If you are having trouble finding a line of credit for your business, you might want to work with a financial consultant. These professionals can help you discover how best to manage your funds, improve credit and find credit cards that might currently be available to your business.[5]

Rebuilding Your Credit

  1. Negotiate your balance. Contact your creditors and work with them to negotiate any missed payments or remaining balances. Some fees or debts may be waived if you offer certain payment plans or options. Work with your creditors to negotiate your credit bills and improve your credit score.[6]
    • Try offering to pay your reaming balance outright to have any extra fees or penalties dropped.
  2. Pay your bills on-time. An important aspect of maintaining a healthy credit score and preventing further issues is to pay any credit bills on time. Late fees and missed payments can hurt your credit score while paying on time can help improve it.[5]
  3. Set up reminders. If you have recurring bills or payments, you might consider setting up some form of reminder. This will help you remember when to pay your bills and prevent you from incurring any late fees or penalties due to missed payments.
    • Try marking any due dates on your calendar.
    • If you have a smart phone, you can set up alerts to remind you of upcoming payments.
  4. Know your limits. Knowing the limits of your business credit card can help you effectively use it while improving your credit score. Using your credit card too often and either maxing out your card each month or coming to close to maxing it out can damage your credit score.[6]
    • Avoid using your card for every purchase.
    • Do not max your credit card out each month.
    • Overusing your card can hurt your credit score.
    • Don't use your card for more than 30% of purchases.
  5. Keep cards open. Although it may seem like a good idea to cancel your old business credit cards, doing so can actually hurt your credit score. Keeping cards open and using them sparingly can be a better option, building your credit score back up over time.[7]
    • Closing a card can cause credit rating to drop.
    • Keeping your credit card open allows you the chance to start using it to improve your credit score.

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Sources and Citations

  1. ↑ 1.0 1.1 http://www.cardhub.com/credit-cards/bad-credit-business/
  2. ↑ https://www.credit.com/credit-cards/business/
  3. ↑ http://www.myfico.com/crediteducation/questions/charge_cards.aspx
  4. ↑ http://www.creditcards.com/credit-card-news/pros-cons-credit-union-credit-cards-1267.php
  5. ↑ 5.0 5.1 http://www.myfico.com/crediteducation/improveyourscore.aspx
  6. ↑ 6.0 6.1 http://www.forbes.com/sites/moneybuilder/2014/05/02/11-ways-to-raise-your-credit-score-fast/
  7. ↑ http://www.forbes.com/sites/moneybuilder/2014/05/02/11-ways-to-raise-your-credit-score-fast/2/
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