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Can Small Business Credit Cards Hurt Your Personal Credit?

There are many reasons why a business credit card can be invaluable for small business owners. Besides building commercial credit and earning rewards for office supplies it can also make cash flow easier to manage and allows them to put expenses on credit that can be paid later when they are paid by their customers. 

No doubt business credit cards offer rewards and benefits that are more suited to the needs of small companies, but how does its use affect your credit scores?

The answer is not just a simple “yes” or “no.” It depends on your provider’s policies and how you use it. So before you apply for a small business credit card it is important to know how it can affect your personal credit and how you can meet your goals. 

1. Application

If you do not own a successful business you will most likely have to apply for a small business credit card. When you apply for this type of card the card issuer will check your credit score and credit history. It will run what is called a hard inquiry on your credit report. This will knock about five points off your credit score according to FICO.com. , and can also lower the chances of your application getting approved.

 Most importantly, almost all small business credit cards are backed up by a personal guarantee which makes you take personal responsibility for any debts the business cannot pay. These debts will likely appear on your credit reports and severely damage your personal credit scores.

2. Ongoing Reporting

Some business credit card issuers report only commercial credit bureaus, and not to consumer credit bureaus. There are few other credit card issuers who do not report monthly payments at all. If you are a small-business owner you can choose a credit card that does not regularly report your account activity to consumer bureaus and so will not make a difference to your score but if you do so you need to avoid missing payments.

Assuming that you have a credit card that regularly reports your personal credit, then once your card is approved the new account will affect your credit history and lower the age of your lines of credit. If you have a very limited history this will cause a small drop in your score. 

This new account can also help you build your credit history because your payments and balances on this new account will appear on your credit report as well. This is good for your credit score. So, your use of credit card accounts may or may not affect your credit score in one way or another.

But you should not make the mistake of thinking that you are not personally liable for the debt on your card because all small-business cardholders have to sign a personal guarantee on almost all small-business card agreements as already mentioned above. So, if the issuer sends the accounts to collections or sues you for balance amounts, it will probably turn up on your credit reports. To make sure if your credit card issuers are reporting your payments and balances or not you can check your credit reports each year from the three major credit card bureaus (Equifax, Experian, and TransUnion)

3. Always pay on time and in full

You must always make minimum payments on your business credit card each month. If you miss a payment either by mistake or because your business is struggling it will impact your payment history. This is very important because your payment history makes up 35% of your FICO credit score. One or two late payments can also trigger a penalty APR on your card and could make it harder to stay on top of payments in the future. 

As a business owner, you must weigh your company’s cash flow and your goal should be to pay your bills completely and not just make minimum payments. This will not only save a lot of interest but if they are not paid for a long time it can greatly damage your scores. 

4. Credit utilization

One of the ways that may affect business owners most is carrying too much debt on their business credit card as it raises their credit utilization ratio or a debt-to-credit ratio (the total amount of debt divided by the total amount of credit you have available). Both personal and business credit card balances are combined to calculate the credit utilization ratio which makes up 30% of your FICO score.

Business credit cards usually tend to have higher credit limits than a personal card and can raise your amount of available credit, but you should not quickly max out the business card as it will definitely hurt your debt-to-credit ratio. By limiting how often you use your credit card each month or by multiple payments every month you can keep your balance low and keep the credit utilization score below 30%. So having a new line of credit may or may not reduce your credit utilization ratio.

5. Use small business loans for larger capital needs.

Business cards are no doubt a great way to finance operational expenses but if you need a larger capital to expand the business you should consider using a small business loan instead of business credit cards. You will have the flexibility to use your credit card for your everyday business expenses without the fear of spoiling your credit utilization. Besides, you may also qualify for a lower interest rate than what is available on your credit card depending on your credit history and your company’s financial situation. 

There are many benefits of using a small business credit card including separating your personal affairs from those of your business. But when it comes to your credit score it is almost impossible to have a complete separation as it has the same impact as a personal credit card.

Busting the Myths – The Truth About Rebuilding Credit

Here are a few of the many myths that are busted about rebuilding credit. You must have read and heard a lot about debt management, debt settlement, and credit score. The question is that do these terms mean anything or are they just layman terms? Can credit be repaired in reality? The answer to these questions can be found in them only. It is correct you need to research a little. If you are in trouble with your debts, get an answer to these questions. This article will give you an idea.

Increasing Credit Score will definitely help you lead a better life.

To start with credit repair is not a mere term and it is very much possible a thing. This means that you can repair your credit without much of a difficulty. Now the question arises as to how can you do so? Again the resolution to these queries lay hidden in the fact which approach you want to opt for, like a do it yourself or professional help.

If you want to stick to the do it yourself method, then you need to understand the importance of the whole thing. To be precise you need to get a fair idea of your position. If you are neck deep in debt and want a way out of this, then you need to get a grip on your spending habits. Pay your creditors on time and get current with your payments. All this will definitely help you lead a better life.

Nonetheless you need to be practical about one thing that is getting professional help for this is a far better idea than opting to do it yourself. A credit advisor on the other hand will hear you out, get all the necessary details from you about your income, and plan thing for you. They will make the required adjustments and assist you with all your queries in regards to debts. All this will in turn help you to get your credit repair done in no time at all. So what are you waiting for? Go ahead and call a credit counselor today!

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More Tips to Fix Credit Scores

To fix credit score individuals think that registering themselves with bureaus helps them manage their bad credits so here are some Awesome tips to fix credit score.

 

Credit scores can be fixed with the following two-fold process:

1. It helps to understand credit scoring and how to skew credit rating system in the favor of individuals.

2. Using credit repair techniques to clean out bad credits.

 

Practical application one can find in everyday scoring health is simple and one can find it fruitful.

Here are a few tips for credit improvement:

1. Firstly, you need to keep your credit balance below 20% and if you can keep it within 40%, or if that is not possible.

2. Do not apply for crone needs it, as if inquiries are made it can hurt credit scores badly.

3. You need to pay bills on time, how to repair bad credit is the big question? Then one needs to avoid bad credit rating.

4. Since length of credit history effects a score positively, so keeping existing credit card accounts open is essential.

5. Varying accounts, by having both unsecured credit like credit cards and secured credits like installment loans are essential to keep knowledge on.

6. Use your credit regularly.

7. Use your credit cards each month.

8. Lastly, if you have limits on credit cards, that has to be raised as high as possible.

 

Repairing bad credit reports

Now apart for repairing bad credits and using these tips mentioned above, maintaining practical credit scoring health, but getting fast credit repair is essential and what about bad credit times on a credit report?

Most bad credit must be removed from the credit report, especially for unpaid entries, recent entries and any other court or collection entries, so most bad credit accounts may be holding up a score by virtue of its age and more than it is hurting credit score.

As one can see, fast credit repair begins by first understanding credit scoring and then making lifestyle choices to twist algorithms in favor of good credits, hence, is followed up by vigorous credit repair plan to delete certain types of bad credit report.These are some awesome tips to fix credit score.

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Why is it hard to get Credit Cards?

If there is an unstable economy in the state then the individual finds it tough to get a credit card. Whether it be a home loan or business loan, it becomes a bit harder to get it approved, due to bad credit score. The credit card company does look at multiple factors when they take up a decision.

Credit worthiness

It is also necessary to look up the credit worthiness, but some credit card companies do look into more detailing. Amount of debt that an individual has as his outstanding amount. It is a big factor to get a credit card. If you have a bad credit score then you might have to adapt a fast credit repair process to cover it up. Or else it will become tough to get access to a new card.

Payment History

Forwarding late payments is also another reason that falls hard on new credit cards. If once a people are late in making payments, then it is taken as mercy. But a regular one may make debtor fall into bad repute. During unstable economy, credit card companies do make some strict lending rules. During a raised economy one will not such harder situations to get a credit card.

Overall Credit Score

The overall credit score plays a major role in bringing out a credit card that one may have applied for. If the economic condition is rocky, credit score needs to higher to get a card. Outside the normal rule credit card companies have their own set of rules to maintain a stable economy.

Credit card companies do look into the financial history of individuals if they apply for a credit card. Maintaining a good credit rating will obviously have a better impact. You will be able to meet the uncertainty of economy. Alternatively, the safe way may be to apply for a new card after the uncertainty period gets over.

 

Follow us here to learn more ways to improve your credit score.