The best business credit card for fair credit

Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Dear Your Business Credit,
I am looking to use a credit card to start a small business. My credit score is about 665.

I went through a rough patch right out of high school and ruined my credit. I have recently been doing well with paying on time and keeping the balances low. How likely do you think it would be for me to get approved? Also, how do I find out what the credit limit would be? – Kari

Dear Kari,
You’re not alone. Many Americans are struggling with damaged credit because of youthful mistakes. Fortunately, our credit system allows for second chances –especially for people like yourself who learn from what went wrong and adopt good habits like paying on time and keeping low balances.

You didn’t mention whether you are referring to a VantageScore or a FICO score, two commonly used systems.

Let’s say it’s a VantageScore. With a credit score around 655, your credit isn’t ruined but, as you acknowledge, it could certainly be better. According to Experian, a score above 700 is typically considered to be good. The average VantageScore in the U.S. was 673 in 2016.

If you are referring to a FICO score, a score in the range of 580 to 669 is considered fair. The average FICO score in the U.S. was 700 in November 2016.

In either case, your credit doesn’t quite make it into the “good” category, though it probably will eventually, if you keep up what you’re doing. If you are able to nudge your score into that category, you’ll have a number of attractive options available that you can’t access with fair credit, so I’d recommend giving it a shot.

Credit card companies will judge you based on your personal credit when deciding whether to issue a card to you and what your interest rate will be. For some tips on how to improve your personal credit, check out our story, “Take a businesslike approach to improving your credit.”

A few card options for new business owners
What if you can’t move the needle quickly and need credit pronto? There are a few small-business cards available for people with fair credit. One of them is the Capital One Spark Classic for Business. There are also specialized gas station cards, such as the BP Business Solutions Mastercard, Chevron and Texaco Business Card, and the Universal FleetCard MasterCard.  If you are in the construction field, you may also be interested in the BuilderPro FleetCard Mastercard, for purchases at home improvement stores.

You might also consider setting aside one personal card for your business expenses, if you have more than one or can obtain a second one, so you have access to some capital and can keep your business and personal expenses separate. The rewards on a business card will be tailored to typical business purchases, so a personal card isn’t an ideal long-term solution, but it could be a useful way to improve your cash flow in the early months of your business. You should be able to switch to a business card at a later date if your credit continues to improve.

As for your credit limit, that is something the credit card company will determine, based on the information you submit on your application. Given that you have not started the business yet and don’t have revenue, your personal income will likely be taken into account.

A final word: Many small-business owners run into trouble by borrowing more than they can reasonably pay back if the business hits a rough patch or has to close. Make sure that when you get a card, you don’t over-borrow. Look for ways to finance your growth through cash flow as much as you can, and you’ll build a heathier business. Good luck! 

See related: Rebuilding credit to run your new business, Is there any such thing as good debt for a small business?

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