Your Business Credit

Add your business as authorized user on personal card? Not likely


Adding your business’s Employer Identification Number to your personal card would be a quick way to build business credit — if it were possible. Unfortunately, there are usually no such shortcuts

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QuestionDear Your Business Credit,
I am trying to build business credit. Can I add my business EIN to a couple of my personal credit cards (as an authorized user) and will that help build my business credit?  — Tim

AnswerDear Tim,
I like the creative way you think, but it won’t help you build your business credit. To get personal credit cards, you generally need to give your Social Security number. You will typically need to do so to get business credit cards, too, unless your business is a very substantial size firm. Obtaining business credit for a small business usually requires a personal guarantee by the owner, even if the card is used exclusively for business.

As to whether you can add your business as an authorized user of a personal card, it does not seem likely. I called customer service at both American Express and Chase to see if it was possible and both immediately said no. The representative at Chase told me that because the regulations for personal and business cards are different, they keep personal cards strictly for use by individuals.

Many entrepreneurs wish there was an instant way to build business credit, but there’s no just-add-water approach. It’s more of a “slow and steady wins the race” scenario.

It starts with establishing the businesses as a separate entity. You’ve already gotten your Employer Identification Number (EIN), which is a first step toward doing that. Opening a business checking account, which you probably have already done, is also important for establishing the business as a separate entity. I discussed some other ways you can build your personal credit in the column, “To get a business loan, you may need to buff personal credit.”

Since you already have good enough credit to obtain credit cards, perhaps it is time to get at least one small business credit card that you use exclusively for business expenses. Assuming you can get an adequate credit limit, start putting all of the business expenses you normally charge on that card and pay the bill each month on time.

There are other advantages to getting a business credit card or two. They often include features that will help you keep track of your spending. Some can be helpful in growing your business, too. For instance, many of them come with cash back, which can add up quickly if you are running a substantial amount of expenses through the card.

You can also build your business credit profile by establishing credit with a store where you buy business supplies, whether that means Home Depot or Staples. The more you can show lenders you are a responsible user of credit, the better your future options will be.

If you are trying to build your credit to get a bank loan, pay close attention to your personal credit score, too. A 10-state survey by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia in 2014 found that the top reason applicants were denied credit was a low credit score. It was the reason 45 percent got rejected.

Building your revenue can also help increase your chances of getting a loan. The Fed’s survey found that only 25 percent of businesses with revenue of less than $250,000 received all of the credit they sought, compared to 36 percent of firms with revenue between $250,000 and $1 million.

Of course, building solid revenues is easier said than done. But the truth is that the more you focus on building a successful business, the more credit you will find available to you. Put your creativity to work building sustainable revenue streams and high profits and it will be increasingly easy to get credit in the future.

See related: Credit for startups almost always requires your Social Security number, Dangers of putting business expenses on a personal card


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