If you’re in the market for a business credit card, haven’t built up much business credit and have gotten the good news that your personal credit score has gone up, you may find that you have more options available than in the past. Here’s what to do next.
The average FICO score for consumers was 711 as of July, according to data from the credit scoring firm. Experian, too, reported that credit scores had risen. As of October, the average Vantage Score was 688, a six-point jump since 2019.
Some experts believe that stimulus payments have helped people pay down their balances, lowering credit utilization. Meanwhile, consumers have had fewer opportunities to spend money on purchases like entertainment, helping many to lower their balances.
One thing many business owners discover when they apply for business credit cards is that lenders look at their personal credit score. Business credit and personal credit are different, but when a new business does not have enough business credit to qualify for financing on its own, lenders look at the owner’s personal credit.
As you may have noticed, almost all business credit cards require a personal guarantee – a promise you will pay the balance if the business can’t.
So, if you’re in the market for a business credit card, haven’t built up much business credit and have gotten the good news that your personal credit score has gone up, you may find that you have more options available than in the past.
How to make the most of a credit score improvement
Compare it with your old score
If it has only gone up by just a few points, chances are your options will be similar to the last time you applied. However, if it has risen significantly, check out the options available for your level of credit, such as “good credit” or “excellent credit.”
You may be able to qualify for a card with a lower interest rate or larger credit limit than the ones you currently have. CreditCards.com lists a number of business cards and requirements for applicants.
Review your current cards
Review the terms of any business cards you already have. If any of them started out as 0% interest deals but now have started charging higher interest, you may be able to do a balance transfer to a card offering better terms if you successfully apply for a business credit card now.
Check your balances
Make sure to avoid high credit utilization on your business cards. Some of them do report to the credit bureaus that track your personal credit. Using most of the credit on any given card can negatively impact your credit score.
Pay your credit card bills on time
This goes for both business cards and personal cards. You’ll want to do all you can to not only keep your personal score high but also to build good business credit.
Build your business credit
Make sure you are building a business credit score, so you don’t have to rely on your personal credit as much in the future. To make sure you are being tracked, check with the major credit bureaus that track business credit.
Remember, the best time to apply for credit is always when you don’t need it. Even if you don’t need to purchase anything on a business credit card in the near future, it doesn’t hurt to have one tucked away in a drawer, in case you ever do.
Lenders shy away from offering credit when a business is short of funds, because they want to be paid back. If your personal credit score is better than it’s ever been, why not make the most of it?