What Credit Score Is Needed for a Business Credit Card?

Business credit cards serve as a financial tool for managing expenses, improving cash flow, and separating personal and business finances. These cards can offer benefits like higher credit limits and various rewards programs. Obtaining a business credit card often depends on demonstrating creditworthiness, which is primarily assessed through credit scores. This article will clarify the types of credit scores relevant to these applications and the typical requirements for approval.

Understanding Credit Scores for Business Cards

When applying for a business credit card, lenders consider both personal and business credit scores. Personal credit scores, such as FICO and VantageScore, range from 300 to 850. A FICO score between 670 and 739 is considered good, 740 to 799 is very good, and 800 and above is exceptional. VantageScore ranges also span 300 to 850, with good scores falling between 661 and 780. These personal scores are relevant for new or smaller businesses, as lenders often require a personal guarantee from the business owner, meaning the individual is personally responsible for the debt if the business cannot repay it.

Business credit scores assess the creditworthiness of the company itself. Key models include Dun & Bradstreet’s PAYDEX, Experian’s Intelliscore Plus, and FICO’s Small Business Scoring Service (SBSS). The PAYDEX score ranges from 1 to 100, with an 80 or higher considered good. Experian’s Intelliscore Plus ranges from 300 to 850, or uses a 1-100 scale, with scores above 76 indicating low risk. The FICO SBSS score ranges from 0 to 300, with scores above 140 or 160 considered good. While business credit scores are increasingly important for established companies, personal credit remains a primary focus for many business credit card issuers, particularly for sole proprietors or small limited liability companies (LLCs).

Typical Credit Score Requirements

Most competitive business credit cards require a personal credit score in the “Good” to “Excellent” range for approval. This translates to a FICO score of 670 or higher. Cards offering more favorable terms, such as lower interest rates, higher credit limits, and richer rewards programs, seek scores of 700 or even 750 and above. A higher score indicates a lower risk to lenders, increasing the likelihood of approval for premium cards.

For individuals with “Fair” personal credit, a FICO score between 580 and 669, options for business credit cards are more limited. These cards may come with higher annual percentage rates (APRs), lower credit limits, and fewer benefits. Secured business credit cards are a common alternative for those with fair or limited credit history. These cards require a refundable security deposit, which sets the credit limit and acts as collateral, reducing risk for the issuer. Using a secured card responsibly helps build a positive credit history, potentially leading to eligibility for unsecured cards over time.

Credit score thresholds vary among different card issuers and products. Some corporate cards may not require a personal credit check if the business demonstrates strong financials or has venture backing. For most small businesses and startups, however, the personal credit score remains a significant factor in the approval process.

Other Factors Lenders Consider

While credit scores are a primary consideration, lenders evaluate other aspects of a business and its owner during the application process. Business revenue or income is a significant factor, as lenders want to ensure the business generates sufficient and consistent funds to repay its debts. For established businesses, annual revenue between $25,000 to $100,000 is acceptable, though requirements vary by card. For startups or businesses with no revenue, lenders consider personal income, including earnings from side hustles or freelance work.

The time a business has been operational plays a role. Established businesses with a longer operating history are perceived as less risky than newer ventures. Lenders require a minimum number of years in business, though new businesses can still qualify based on other factors. Industry type also influences approval, as some industries are viewed as higher risk due to market volatility or other factors.

Existing banking relationships aid in the approval process. Having a business bank account or other financial products with the same institution demonstrates financial stability and a track record. Lenders also consider the applicant’s personal debt-to-income (DTI) ratio, which compares monthly debt payments to gross monthly income. A lower DTI ratio indicates a greater ability to manage additional debt. Finally, the personal guarantee is a common requirement that links the individual’s creditworthiness directly to the business’s ability to secure credit.

Steps to Enhance Your Approval Odds

Improving one’s personal credit score directly enhances approval odds for a business credit card. This involves consistent on-time payment of all bills, a significant factor in credit scoring models. Reducing personal debt and maintaining a low credit utilization ratio, ideally below 30% of available credit, positively impacts scores. Regularly checking personal credit reports for errors and disputing any inaccuracies helps ensure the score accurately reflects financial behavior.

Establishing business credit strengthens an application, particularly for more established businesses. Steps include obtaining an Employer Identification Number (EIN) from the IRS. Additionally, acquiring a Data Universal Numbering System (DUNS) number from Dun & Bradstreet and opening vendor accounts that report to business credit bureaus are beneficial. Consistent and timely payments to these vendors help build a positive business credit history.

Reducing overall debt, both personal and business, improves the debt-to-income ratio and signals financial responsibility to lenders. Before applying, gather all necessary documentation, including business financial statements, tax returns, and personal identification. Being prepared with accurate information streamlines the application process. Strategic application involves researching cards that align with one’s current credit profile and business needs, avoiding those with overly stringent requirements that could lead to denial and a temporary credit score dip.