BACK

Your Business Credit

Using business’s tax ID is no shortcut to building credit

Summary

When it comes to credit, most business is personal

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

QuestionDear Your Business Credit,
I would like to build my credit up with my tax ID, but my personal credit is not good. Can you help me? — Marcus

AnswerDear Marcus,
As I suspect you’ve already discovered, when you are looking to borrow for a small business, both banks and credit card issuers tend to say yes or no based on your personal credit profile — even when issuing credit in the name of a business. Usually, they want small-business owners to give a personal guarantee so they have someone to come after if the debt goes unpaid. That puts you at a disadvantage if you haven’t built up much personal credit because you’re young or don’t have much need to borrow — or if you have made some credit mistakes.

I wish I could give you a quick and easy solution, but in a small business, you generally can’t bypass using your personal credit and jump straight to using business credit alone. Lenders will usually rely on the business’s credit, tied to a federal tax ID, only when the company has become pretty substantial in size. But even in those cases, they may want a personal guarantee from the business owner to issue loans.

The only lasting solution for entrepreneurs is to do the work to build up good personal credit. That takes patience — something that, alas, is hard for many action-oriented business owners to summon. It’s similar to getting in shape. Sure, it would be nice if there was a way to get really buff by next week, but for someone who has never worked out — or slipped into bad health habits — it takes some time and commitment.

Now for the good news. Building up good personal credit is not rocket science. If you can get any credit card at all, you will have an opportunity to start building a history of paying your bills on time. Look at your credit profile as a billboard that tells lenders two things: whether you pay your bills and if you do so on time. Every action you take to show the answer to both questions is always yes will help you build your personal credit.

If your personal credit is not good, you may need to get a secured card to start. With secured cards, you must give a security deposit equal to the credit line. Secured cards may sound similar to prepaid debit cards, but there’s one crucial difference. Most secured cards let you build a credit history. As you build good personal credit, you should be able to replace the secured card with a traditional card.

In the meantime, take steps to establish separate business credit. Open a separate business checking account, if you haven’t already, and keep your personal and business finances separate.

If your bank sees you are managing your checking account well, your banker is likely to approach you with a business credit card offer. Once you get that business card, start putting small charges on it and pay the balance way before the deadline. Before you know it, you won’t have to be worrying about finding work-arounds to poor credit, because card issuers will be filling your mailbox with offers.

See related:How to get cash for your business without credit, Understanding small-business credit reporting, Credit for startups almost always requires your Social Security number

 

What’s up next?

In Your Business Credit

Does a business card’s guarantor own its rewards points?

Agreeing to guarantee a cardholder’s debt doesn’t automatically grant you the card’s benefits

Published: October 5, 2015

See more stories
Credit Card Rate Report Updated: April 24th, 2019
Business
15.32%
Airline
17.50%
Reward
17.58%
Cash Back
17.60%
Student
17.79%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.