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How to Get a Business Credit Card With Bad Credit

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A business credit card can build your credit profile and help when making essential purchases for your business, but if your credit score has taken a hit or two, qualifying for one may be difficult – though it’s not impossible. Learn how small business owners with bad credit can get approved for a business credit card. [Looking for an alternative to credit cards? Check out our review of business loans.]

Can you get a business credit card with bad credit?

Credit card issuers look for a good credit score (which is considered to be 670 and above, according to Experian), the same as they do with individuals applying for a personal credit card. The higher the score is, the more creditworthy the borrower is considered. The lower the score is, the riskier the business owner appears. (Scores ranging from 580 to 669 are considered fair, while scores ranging from 300 to 579 are considered very poor.)

When assessing the creditworthiness of a business borrower, the card issuer considers income from all sources, but one’s personal credit score dictates whether the applicant will be approved and how much interest they will pay.

“Those with bad credit will have a difficult time getting a credit card since there aren’t a lot of cards aimed at that particular segment,” said Gerri Detweiler, education director at online business lender Nav. “There are some issuers that will issue (credit cards) with a 600 score, which is not a bad credit score but not a great credit score.”

Why would you want a business credit card?

There are several reasons why you would want an unsecured business credit card, but a big one is that a business credit card keeps personal and business expenses separate. That enables you to more accurately track your expenditures, and it makes record-keeping easier.

A business credit card may give you more purchasing flexibility. Many small business owners face cash flow issues from time to time; having a business credit card can alleviate some of those pressures.

If you’re just starting out or haven’t been in business for too long, a business credit card can help you build or enhance your business credit score. If you are responsible with the card and make payments on time, your credit score will increase, making it cheaper to borrow money in the future.

What credit score do you need to get a business credit card?

The credit score requirement will vary among issuers, but many business credit card companies require a credit score of 675 or higher. That’s not to say there aren’t options for borrowers with poor credit scores, such as those with scores hovering around 600.

What is a secured business credit card?

For business owners with bad credit or no credit history, a secured business credit card is a viable way to improve one’s credit score and access credit.

With a secured card, the credit card company requires a deposit upfront. Your credit limit is typically in lockstep with the deposit. The more on-time payments you make, the more your credit line increases. If your account stays in good standing, which means no late payments, your credit score increases over time.

“Payment history accounts for 35% of your credit score,” said Barry Coleman, vice president of counseling and education programs at the National Foundation for Credit Counseling. “Business owners would be wise to make on-time payments.”

Aside from the deposit requirement, secured credit cards are similar to unsecured credit cards: There’s an annual percentage rate (APR), an annual fee and potentially other charges.

What can you do to build credit if you don’t want a secured card?

If you don’t want a secured card but still want to rebuild poor credit (or establish a good credit history if your business is new), another option is to apply for financing from a vendor.

“There are a number of business suppliers, most notably office and industrial supply companies, that are a little more lenient when it comes to using credit,” said Coleman. “Businesses [that] secure an account with one of these and make sure to pay invoices on time will improve their credit.”

The purchasing limit may be low to start with, but over time, it increases if you meet your obligations. “There are a number of companies that offer these types of accounts,” noted Coleman.

How has COVID-19 affected business credit card issuers?

Before you apply for a business credit card, things have changed because of COVID-19.

“In the past few months, the business credit card market has tightened considerably due to COVID-19,” said Detweiler. “Many have pulled back on marketing to small business owners.”

What are some business credit cards for people with bad credit?

Despite some business credit card issuers being more cautious about whom they approve, there are options for business owners with bad credit. Below are three.

1. Spark Classic from Capital One  

Spark Classic from Capital One is geared toward business owners with bad credit. It considers applicants with credit scores as low as 580. You aren’t required to make a deposit with this card, but you will pay a hefty APR. At last check, the APR was 26.99% for purchases and cash advances. There are no annual fees, and you earn 1% cash back on every purchase for your business. You can redeem points at any time, regardless of how much you’ve accumulated.

Capital One reports your payment history to all three credit bureaus (Equifax, Experian and TransUnion). That means both your personal and business credit score get a boost each month you make your payment on time.

2. Wells Fargo Business Secured Credit Card

The Wells Fargo Secured Business Credit Card provides credit lines from $500 to $25,000, depending on the amount of your deposit. You earn 1.5% cash back for every dollar spent using the credit card.

There is a $25 annual fee, and the APR on purchases is prime plus 11.90%. For cash advances, Wells Fargo charges prime plus 20.74%.

Wells Fargo reports your payment history to the credit bureaus, too, and it periodically reviews your account and recent credit history to see if it can upgrade you to an unsecured business credit card.

3. BBVA Secured Visa Business Credit Card

The BBVA Secured Visa Business Card is geared toward business owners who have cash in the bank but who have a bad credit score. The card is linked to a BBVA savings account. The minimum deposit is $500. Your line of credit is 90% of the balance in your savings account. You can add funds to your savings account in $100 increments to increase your line of credit.

There is no annual fee for the first year. After the first year, the annual fee is $40. You can add employee cards free of charge and can set spending limits for each card. Cardholders earn 1.5 points for every $1 in qualified purchases. The APR on purchases is 16.24% and jumps to 25.24% for cash advances.

How to use business credit cards to improve your credit

While your options for business credit cards may be limited now, by using the card you’re approved for responsibly – be it secured or unsecured – (for example, you are judicious about your purchases, you make payments on time, etc.), your credit score will go up, the maximum limit increases, and you can qualify for other business credit cards and other types of business financing.

Here are four steps you can take to improve your business’s financial situation.

  1. Identify the cause of your credit problem. Your credit score took a hit for a reason. Perhaps you missed too many payments or you have more debt than you can manage. You have to acknowledge and change the behavior that caused your current credit predicament. If you don’t, you will be in an even deeper financial quandary.
  2. Pay on time. Your credit score is based in large part on your payment history. By paying your balance on time, your credit score will get a boost. To ensure you do that, set an alert to remind you a week before the payment deadline or, better yet, set up automatic payments with the card issuer.
  1. Monitor your credit score. By making payments on time and not taking on an unreasonable amount of debt, your credit score will improve. Within a few months to a year, you can apply for an unsecured business credit card, but to do that, you need to monitor your credit score. Business owners are advised to check their score with Equifax, Experian and TransUnion, quarterly, or at least twice a year.
  1. Think long term. It’s easy to splurge on something you and your business can’t afford. But that short-term gain can lead to financial pain later. Coleman advised business owners with poor credit to focus on reaching financial stability as soon as possible. That will prevent you from running into trouble when trying to access money in the future. “It’s a lot easier to grow your business when you have access to capital,” said Coleman. “That access comes with positive financial practices.”

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Virginia Used Car Dealer Offers Local Drivers Reliable Pre-Owned Vehicles and Affordable Prices

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Used Cars Under $10,000 in Virginia

Karen Radley Volkswagen is offering local drivers a variety of used vehicles to choose from that are priced under $10,000, including capable SUV’s, versatile crossovers, fuel-efficient sedans and sporty coupes.

There are many ways for people to save money when shopping for the things they need and can’t live without. For many people, a vehicle that can offer them the reliability they need is incredibly important and something they require every day. Drivers in Virginia that are searching for affordable used cars under $10,000 now have a dealership they can turn to that will help them get behind the wheel of a reliable vehicle they can afford. Karen Radley Volkswagen is offering local drivers a variety of used vehicles to choose from that are priced under $10,000, including capable SUV’s, versatile crossovers, fuel-efficient sedans and sporty coupes.

With used car specials that offer affordable pricing and a large inventory of pre-owned vehicles that can be purchased for under $10,000, drivers will be able to find the vehicle they’ve always wanted to drive at a price that fits their budget. Karen Radley Volkswagen also helps make buying a reliable and budget-friendly used car easy by offering used car loans to drivers regardless of their credit score. Good or bad credit car loans are fast and easy to obtain and apply for when shopping at Karen Radley Volkswagen.

To learn more about how to get behind the wheel of an affordable used car in Virginia, or to view the current inventory of used cars under $10,000, drivers can visit the local dealership’s website by going to http://www.karenradleyvw.com. Questions can be directed towards the sales staff by calling 833-243-5895. Shoppers may also see all the used cars at Karen Radley Volkswagen by driving to 14700 Jefferson Davis Highway.

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Legislation to Combat Unfair Auto Insurance Rates Clears Committee

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Legislation to Combat Unfair Auto Insurance Rates Clears Committee

 

Trenton – In response to high automobile insurance assessments, the Senate Commerce Committee passed legislation sponsored by Senators Nia Gill, M. Teresa Ruiz, Nilsa Cruz-Perez, and Nellie Pou, which would prohibit the use of education, occupation, homeownership status, marital status, or credit score in certain automobile insurance determinations.

 

“The use of factors such as employment status and credit score in calculating insurance premiums carries a severe economic consequence for working-class families. A person’s income or education has no bearing on driver safety or risk and only serves to reinforce existing inequalities,” said Senator Gill (D-Essex/Passaic). “The pandemic has given new importance to how we determine eligibility. Millions of New Jerseyans are experiencing economic hardship; this will inevitably impact their credit scores, occupation, and employment status. This bill is critical to ensure people are not subject to increased premiums based on metrics that have nothing to do with driving, and it will ensure drivers are not subject to increased premiums based on unforeseeable consequences of the pandemic.”

 

The bill, S-111, would prohibit automobile insurers from assigning an insured or prospective insured person to a rating tier based on educational level, credit score, marital status, homeownership status, or employment, trade, business, occupation or profession.

 

“Newark has some of the highest car insurance rates in the country. Under our current laws car insurance companies are preying on New Jersey’s most vulnerable, charging low income customers significantly more regardless of their driving history. Every sponsor has done tremendous legwork to bring an end to this harmful practice. I am proud to have been a driving force in the final push to move this important legislation and to ensure it included prohibiting the use of credit scores,” said Senator Ruiz (D-Essex). “Insurers should be basing their rates on the likelihood that someone will be in an accident, not his or her ability to pay for those damages out of pocket.”

 

“It is absurd that someone with a bad credit score pays more for car insurance than someone who has been convicted of a DUI,” said Senator Cruz-Perez (D-Camden/Gloucester). “We cannot allow insurers to continue basing rates on credit history or socioeconomic status rather than someone’s driving record.”

 

“We must stop penalizing people for being poor,” said Senator Pou (D-Bergen/Passaic). “This legislation will hold insurance companies accountable and help to ensure that our most vulnerable citizens are given fair pricing for policies that are a requirement to drive.”

 

The bill would take effect 90 days after enactment.

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Reasons You Can Be Denied for a Bad Credit Auto Loan

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Everyone’s situation varies, but there are some circumstances that bad credit auto lenders simply don’t accept. To give you an idea of what to expect when you apply for a car loan, here’s what subprime lenders tend to require and what situations they don’t accept when determining your eligibility for auto financing.

Job Situations and Bad Credit Car Loans

First, it’s important to note that all lenders have different work, income, and even residency requirements. However, if you’re applying with a bad credit car lender, also known as a subprime lender, they tend to follow similar guidelines for who they’re willing to approve for auto financing.

When it comes to your work situation and what type of income you’re bringing in each month, there are some situations that subprime lenders simply don’t accept.

No Income at All

If you’re not bringing in any income from a job or any other type of assistance, expect to be turned down. Any car lender, bad credit or not, is going to need you to provide proof that you have a stable income.

Some subprime lenders can accept income such as alimony, permanent disability, pension, and even public assistance – if you can prove that you’re going to receive it for the entire duration of your auto loan term, that is.

To get into a car loan, you must have provable, consistent income that can support the auto loan the whole time you’re repaying it.

Sparse Work History

This requirement can vary, but borrowers who haven’t held down the same job for around six months to a year can often be turned down for a car loan. Auto lenders typically also require you to have consistent work history over the last three years.

Subprime lenders look for stability in your work history and employment. The longer you’ve held the same job in the same line of work, the higher your chances of getting approved for a car loan.

Brand-New Job

If you just started a job in a new field, then a subprime lender may be hesitant to approve you for financing. Subprime lenders prefer borrowers who’ve been at the same job for at least six months to a year.

However, if you recently switched employers but it’s in the same line of work, then they’re more likely to be understanding of that situation.

Living Situations and Bad Credit Auto Loans

Situations That Can Deny You a Bad Credit Car LoanAlong with having work and income requirements, subprime lenders also take a look at your residence history. While living situations can vary greatly, they are again looking for stability.

A stable borrower is one that is more likely to repay their auto loan. So, the longer you’ve been living in the same area, the higher your chances for an approval. However, just because you’ve lived in the same town for 20 years doesn’t always mean you meet the residency requirements.

Here are a few living situations that subprime lenders probably won’t accept:

You’re Not a Homeowner or a Renter

To meet residency requirements, most subprime lenders require that you’re a homeowner or a renter. If you’re a homeowner, you must prove your residency with a recent utility bill in your name, or maybe even a home title in your name if you don’t have any utilities in your name.

If you’re a renter, then your name must be on the lease. You should also expect to need a recent utility bill in your name to prove your residence. Some lenders may even require a copy of a lease agreement, a mortgage statement, or a copy of a house payment/rent check.

However, if you live with relatives or you live at an apartment where your name isn’t on the lease, then it could be more difficult to qualify for a car loan. Subprime lenders require that their borrowers have a permanent address, with documents that prove that you live there. If you don’t have any utilities in your name, or your name isn’t on a lease or mortgage statement, then you could run into trouble getting approved for auto financing.

You Don’t Have a Permanent Address

Some people live in RVs, or even hotels, to accommodate a nomadic lifestyle. While having the flexibility to move wherever you’d like at the drop of a hat suits many people, the sad news is that these unconventional ways of life aren’t likely to meet the requirements of a car lender. Since your address isn’t permanent, it can make a subprime lender hesitant to approve you for financing.

Other Requirements of Subprime Lenders

There could be many different reasons why a lender can deny you for an auto loan. To help you be best prepared, here’s a list of other common requirements of subprime lenders:

  • Must have a cell phone or landline phone in your name (no prepaid phones)
  • Have to make a down payment of at least $1,000 or 10% of the vehicle’s selling price
  • Bring a list of five to eight personal references with complete contact information
  • Must have a valid driver’s license with your current address

Subprime Lenders and Bad Credit Car Dealerships

If your credit is worse for wear, you’re likely to have a better chance of getting approved for a car loan if you apply with a subprime auto lender, since they consider more than just your poor credit score while they determine your eligibility for a car loan.

Where are subprime lenders? They’re signed up with special finance dealerships, and they are more prominent nowadays. Here at Auto Credit Express, we know what dealers are signed up with subprime lenders, and we can look for one in your area at no cost.

Fill out our free auto loan request form, and we’ll get right to work looking for a dealership near you with the bad credit lending resources you need.

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