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How to get a business credit card

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

As a small business owner, you have a lot on your plate. Between your business and personal life, balancing it all is no easy task, let alone keeping everything organized. One solution many small business owners turn to is applying for a business credit card

A business credit card can simplify finances while building business credit—a smart move in establishing your business and supporting its long-term success. Here’s what you can expect if you want to apply for a business credit card: 

  • Research application requirements
  • Order your personal credit report 
  • Compare business credit card options 
  • Read the fine print
  • Complete your online application
  • Keep your business credit in good shape 

If you’re just starting out and don’t have any business credit yet, it’s still possible to get a business credit card. Instead of analyzing your business history, the banks will examine your personal credit history. Having a good personal credit history will make it easier to qualify. 

7 business credit card requirements to know before applying

You don’t need a large amount of revenue, a team of employees or even a full-time business to qualify for a business credit card. The process is similar to applying for a personal credit card, with a few differences. Here are the requirements when you apply: 

1. Full legal business name

Straightforward but necessary, this is simply the name of your business. This is what will appear on the credit card if you’re approved. Use the business name you originally registered with the state, or just your legal name if you’re a freelancer. 

2. Business type/structure 

Is your business a corporation, nonprofit or sole proprietorship? You’ll be asked to indicate this in your application. If you’re a freelancer, you’ll typically choose sole proprietorship. It’s important to note that if your business has any beneficial owners—anyone who directly or indirectly owns at least 25 percent of the business—you’re required to provide basic information on those individuals as well for record-keeping purposes. This might include things like their address, birth date and Social Security number. 

3. Industry type 

You’ll be asked to include the industry your business operates within, chosen from a provided list. Select the one that best describes your business—it’s okay if it’s not an exact match. 

4. Annual business revenue 

It’s no surprise that credit card companies want a report of how much money your business brings in each year. They need to ensure that your annual revenue is sufficient to cover your credit card payments. If you’re brand new and don’t yet have an annual revenue, your personal income will likely be verified instead. 

5. Years in business and number of employees

You’ll be asked how long you’ve been in business and how many employees you have. If you haven’t been in business for a full year, you can put “zero.” If you’re a team of one and don’t employ anyone else, you can put “one” for yourself. 

6. Tax identification number 

When you registered your business with the state, you were issued a nine-digit number. Similar to a Social Security number, this is your EIN (employer identification number). Credit card issuers require it to verify your business. For freelancers or sole proprietorship business owners without an EIN, list your Social Security number here instead. 

7. Legal name, contact information and social security number

Your legal name, personal contact information and Social Security number will always be required—it’s how credit card issuers check your personal credit history. Unless you’re already an established business with a few years under your belt, it’s likely that your personal credit history will be referenced to determine whether or not you qualify. To ensure your reliability as a borrower, they’ll look at things like your credit score, your income and any current or outstanding debts. 

How to apply for a business credit card 

The process of applying for a business credit card is almost the same as how you’d apply for a personal credit card. There are a few steps to follow that can help you identify the right card for you. 

How to Apply for a Business Credit Card in 4 Steps: 1. Order your personal credit report. 2. Compare business credit card options. 3. Read the fine print and understand your personal guarantee. 4. Apply online.

Order your personal credit report 

As a newly established business, you likely haven’t built any business credit yet. In lieu of this, credit card companies will consider your personal credit history to verify you as a potential borrower. Before you apply for a business credit card, it’s a good idea to order your personal credit report and check your credit score. 

While every business credit card will have different requirements, most require good or excellent credit for approval—a score of 670–739 is considered good, and 740 or higher is considered very good. A score of 800+ is considered excellent. 

The three nationwide credit bureaus—Equifax®, Experian® and TransUnion®—provide one free copy of your credit report every year, which can be ordered from AnnualCreditReport.com. Take advantage of those free reports and ensure your credit score is sufficient for approval before you apply. 

Compare business credit card options

There’s no such thing as one-size-fits-all when it comes to choosing a business credit card. Every business credit card comes with different rates, fees and perks that you’ll want to investigate. Your choice will ultimately depend on your unique situation, such as your financial goals, your purchasing needs and other factors specific to your business. 

Consider your current financial situation and business needs. Is there a large purchase or investment you need to get your business off the ground, but you don’t have enough funds to cover it yet? If so, you’ll want to pay attention to the APR, or annual percentage rate, when choosing a card. 

APR determines the amount of interest you’ll pay within a year, and some business credit cards offer 0 percent introductory APR. This type of offer can give you some time, usually 12 months, to pay off larger purchases and provides some breathing room when you’re first starting out. 

Ask yourself where you spend the most in your business. Different credit cards offer different types of rewards, so choosing a card that rewards you for the categories you spend most in is something to consider. 

Do you travel frequently? A card that rewards you with flight miles and prepaid hotels might be what you want. Are basic everyday purchases or office supplies and utilities your priority for a business credit card? You might want to look into cards offering cashback rewards for those types of purchases. Will you be attending client dinners often? Some cards offer cashback rewards specifically for restaurant spending. 

 Business credit cards offer different rewards, like rewards on travel expenses, everyday purchases and restaurants.

The bottom line is that every business credit card offers something different, so tailor your choice according to how your business operates and where you know you’ll be using your card the most. 

Read the fine print: understand your personal guarantee

The majority of business credit cards will require a personal guarantee when you apply. A personal guarantee holds you personally responsible for debt owed if your business is unable to repay it. It’s how credit card companies mitigate risk when extending lines of credit, and it’s critical that you’re aware of this requirement—often nestled in the fine print of your credit card terms—before going through with an application. 

In the event that your business fails or you aren’t able to keep up with your payments, this liability holds you personally responsible for repayment, which can put your personal assets at risk. 

Apply online

Once you’ve completed the steps above and have chosen the best business credit card for your needs, you can start the application process online. If you’ve ever applied for a personal credit card, the process won’t be much different. 

Gather your required information ahead of time to simplify the process. This includes your personal contact information and Social Security number, and the details of your business as mentioned above (business name and contact information, EIN, number of employees, revenue, etc.). Then, simply fill out the application and submit it online. Take extra time to make sure every detail you include is accurate, and double-check your information before submitting. 

What if I have poor personal credit? 

Being a small business owner comes with risks. If you’ve suffered financial setbacks in the past and your personal credit took a hit because of it, you might be wondering how you’ll qualify for a business credit card. 

While your options are limited, it’s still possible. Instead of a standard unsecured business card, a secured business credit card that requires a low or no minimum credit score for approval is your best option. A secured card is backed by a cash deposit you put down up front, which serves as a payment guarantee for lenders. If used responsibly, you can use this card to improve your business credit score and switch to a better card option in the future. 

While lenders use your personal credit score as a qualifying factor in obtaining a business credit card, it’s important to note that your personal credit is separate from your business credit. 

Your personal credit is tied to your Social Security number and is based on your personal spending history. Business credit, however, is tied to your EIN and reflects your business’s financial history. 

Your personal credit score, which is created by the three major credit bureaus (Equifax, Experian and Transunion) is categorized by a single number. The most common method to determine this score is the FICO® method. With business credit, there’s no standard system used to determine your score; each business credit reporting service varies in how they establish it. Still, the foundation of a good business credit score will always include things like paying down your debts on time and maintaining a solid payment history. 

How to keep your business credit in good shape

Establishing your business and applying for a business credit card are the first steps toward building solid business credit. From there, it just takes time, discipline and following a few basic principles to keep your business credit in good standing. Here are some best practices for responsible business credit management:

  • Choose credit card vendors that report payments
  • Make your payments early 
  • Look for errors on your credit reports 
  • Establish your business as credible 

Choose credit card vendors that report payments

Not every credit card company or lender reports their customers’ credit history to the credit bureaus. If such is the case for the supplier you work with, no amount of stellar credit building habits will improve your business credit score. To ensure your credit building efforts aren’t wasted, confirm that your lender will report your payment history to the credit bureaus.

Make your payments early 

Since your credit score is largely determined by your payment history, the timeliness of your payments shouldn’t be ignored. But what many people don’t realize is that while paying on time can help you secure a good score, going a step further and making your payments early will increase your score even more. 

Look for errors on your credit reports 

Credit reporting errors aren’t uncommon—but it is common for them to go unnoticed if you don’t periodically check your credit reports. Errors and fraudulent activity can hurt your credit score, and unless you make a point to keep a pulse on your account activity, you may find yourself in a difficult position the next time you try to borrow money or get a loan. Avoid this by checking your reports for errors multiple times throughout the year. 

Establish your business as credible 

Lenders consider more than just your payment history when determining your creditworthiness. An additional factor you should work to maintain is establishing your business as credible. This means giving your company a legal name and filing it with your state, as well as providing its phone number, mailing address and website. This signals that you’re a legitimate business and puts you in a better position to receive any financing you may apply for in the future. 
Business credit cards play an essential role for many small businesses who rely on loans and grants and want to build their company credit profile. If you’re dealing with a low credit score due to unfair errors on your credit history, Lexington Law provides credit repair services that can help you navigate them before you go to apply for a business credit card. When used responsibly, business credit cards can empower small business owners to build their company’s reputation and succeed in the long term.

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Does Getting Joint Credit Cards Have an Impact on Both Spouses’ Credit?

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couples credit history

While marriage can help you improve your financial situation, it does not automatically mean that you and your spouse will share a credit report. Your credit records will remain separate, and any joint accounts or joint loans that you open will appear on both of your reports. While this can be advantageous, it’s critical to remember that joint account activity can effect both of your credit scores positively or negatively, just as separate accounts do.

Users Who Are Authorized

An authorized user is a user who has been added to an existing credit account and has been granted the authority to make purchases. Authorized users are typically issued a card bearing their name, and any purchases made by them will appear on your statement. The primary distinction between an authorized user and a shared account owner is that the account’s original owner is solely responsible for debt repayment. Authorized users, on the other hand, can always opt-out of their authorized status, although the principal joint account owner cannot.

If your credit score is better than your spouse’s as an authorized user, he or she may benefit from a credit score raise upon account addition. This is contingent upon your creditor notifying the credit bureaus of permitted user activity. If your lender does report authorized users, the activity on your account may have an effect on both you and your spouse. However, some lenders report only positive authorized user information, which means that late payment or poor usage may not have a negative effect on someone else’s credit. Consult your lender to determine how authorized users on your account are treated.

Joint Credit Cards Have an Impact on Your Credit Score

Opening a joint credit account or obtaining joint financing binds both of you legally to the debt’s repayment. This is critical to remember if you divorce or separate and your spouse refuses to make payments, even if previously agreed upon. It makes no difference who is “responsible,” the shared duty will result in both partners’ credit histories being badly impacted by late payments. Regardless of changes in relationship status or divorce order, the creditor considers both parties to be liable for the debt until the account is paid in full.

Accounts Individuals

Whether you’re happily married or divorced, you and your spouse may decide to open separate credit accounts. Most creditors will enable you to transfer an account that was previously joint to one of your names if both of you agree. However, if there is a debt on the account, your lender may refuse to remove your spouse’s name unless you can qualify for the same credit on your own. Depending on your financial status, qualifying for financing and credit on a single income may be tough.

Considerations

While creating the majority of your accounts jointly with your spouse may make it easier to obtain financing (two salaries are preferable to one), reestablishing credit independently following a divorce or separation is not always straightforward. To make matters worse, your spouse may wind up causing significant damage to your credit rating following the separation, either intentionally or through irresponsibility – making the financial situation much more difficult.

Before you rush in and open accounts with your spouse, take some time to discuss the shared responsibility of these accounts and what you and your husband would do in the event of a worst-case situation. These types of financial discussions can be difficult, especially when you rely on items lasting a long time, but a mutual understanding and respect for each other’s credit can go a long way toward keeping your score when sharing an account.

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Should you pay down debt or save for retirement?

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While establishing a comprehensive, workable budget is undeniably one of the most important factors in maintaining a healthy financial life, it can also be one of the most difficult. For those who are struggling with personal debt, building a budget can be particularly challenging. When the money coming in has to stretch like a contortionist to cover expenses, it can be hard to determine where to focus — and where to trim.

Sometimes, the battle of the budget can come down to a choice between dealing with the present — and thinking about the future. When your income is running out of stretch, do you pay off your existing debt, or do you start saving for retirement? At the end of the day, the solution to that particular dilemma depends on the type of debt you have and how far you are from retiring.

If you have high-interest debt, pay it down

When considering how to allocate your budget, it’s important to understand the different kinds of debt you may have. Consumer debt can be categorized into two basic types: low-interest debt and high-interest debt, each with its own impact on your credit (and your budget).

In general, low-interest debt consists of long-term or secured loans that carry a single-digit interest rate, such as a mortgage or auto loan. Though no debt is the only real form of good debt, low-interest debt can be useful to carry. For instance, purchasing a home with a low-interest mortgage can actually save you money on housing costs if you do your homework and buy a house well within your price range.

High-interest debt, on the other hand, typically has a hefty double-digit interest rate and shorter loan terms, such as that of a credit card or payday loan. High-interest debt is the most expensive kind of debt to carry from month to month and should always be priority number one when building a budget.

To illustrate why you should focus on high-interest debt above everything else, consider a credit card carrying the average 19% APR and a $10,000 balance. If the balance goes unpaid, that high-interest credit card debt will cost $1,900 a year in interest payments alone. Now, compare that to the stock market’s average annual return of 7%, and it becomes clear that you’ll see significantly more bang for your buck by putting any extra funds into your high-interest debt instead of an investment account.

If you are having trouble paying off your high-interest debt, there may be some steps you can take to make it more manageable. For example, transferring your credit card balances from high-interest cards to ones offering an introductory 0% APR can eliminate interest payments for 12 months or more. While many of the best balance transfer cards won’t charge you an annual fee, they may charge a balance transfer fee, so do your research. You’ll also want to make sure you have a plan to pay off the new card before your introductory period ends.

Most balance transfer offers will require you to have at least fair credit, so if your credit score needs some work, you may not qualify. In this case, refinancing your high-interest debt with a personal loan that has a lower interest rate may be your best bet. Make sure to compare all of the top bad credit loans to find the best interest rate and loan terms.

If you’re nearing retirement, start to save

The closer you get to retirement age, the more important it becomes to ensure you have adequate retirement savings — and the more pressure you may feel to invest every spare penny into your retirement fund. No matter your age, however, paying off your high-interest debt should always remain the priority, as it will always provide the best rate of return (as well as likely provide a credit score boost).

Indeed, no matter how tempting it becomes, you should avoid reallocating money you’ve dedicated to paying off high-interest debt to save for retirement. Instead, the focus should be on re-evaluating your budget to find any additional savings you can. To be successful, you will need to make a strong distinction between want and need — and, perhaps, make some tough lifestyle choices.

Though simply eliminating your daily coffee drink won’t magically provide a solid retirement fund, saving a few bucks by homebrewing while also eliminating a pricey cable bill in favor of an inexpensive streaming service — or, better yet, free library rentals — can add up to big savings over the course of the year. The ideal strategy will involve overhauling every aspect of your lifestyle, combining both large and small cuts to develop a lean budget structured around your long-term goals.

Of course, while you should never allocate debt money to your retirement savings, the reverse is also true. It is almost always a horrible idea to remove money from your retirement account before you hit retirement age — for any reason. Withdrawing early means you will be stuck paying hefty fees for withdrawing money early and, depending on the type of account, you may also have to pay significant taxes.

Aim for both goals by improving income

As you take the necessary steps to pay off debt and save for retirement, you may have already stretched the budget so thin it’s practically transparent. In this case, it is time to consider ways to improve your overall income. Increasing the amount you have coming in not only provides extra savings to put toward your retirement, but may also speed up your journey to becoming debt-free.

The easiest solution may be to look for ways to increase your income through your current job; think about taking on additional shifts or overtime hours to earn some extra cash. Depending on your position — and the time you’ve been with the company — consider asking for a pay raise or promotion, as well.

If you do not have options to make more money at your day job, it may be time to find a second job. Look for opportunities that provide flexible schedules that will accommodate your regular job; many work-from-home positions, for example, can easily fit into most work schedules. Doing neighborhood odd jobs, such as babysitting and dog walking, may also provide a solid income boost without interfering with your existing job.

For some, the need to pay off debt and improve retirement savings can be more than just a source of stress — but a hidden opportunity to begin a new career adventure. Instead of being weighed down by yet more work, use the desire to better your budget as a reason to explore the profit potential of a passion or hobby. Starting a small online store, part-time consulting service, or other small business can be a great way to improve your income and your overall happiness.

While it may sound intimidating, starting a side business can be as simple as putting together a professional looking website and doing a little marketing legwork to spread the word. And no, building a website isn’t as scary — or expensive — as it seems, either. A number of the top website builders now offer simple drag-and-drop interfaces perfect for putting together a professional-looking web page in minutes (without breaking the bank).

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.



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How does a loan default affect my credit?

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Nobody takes out a loan expecting to default on it. Despite their best intentions, people sometimes find themselves struggling to pay off their loans. These types of struggles happen for many reasons, including job loss, significant debt, or a medical or personal crisis.

Making late payments or having a loan fall into default can add pressure to other personal struggles. Before finding yourself in a desperate situation, understanding how a loan default can impact your credit is necessary to avoid negative consequences.

30 days late

Missing one payment can further lower your credit score. If you can pay the past due amount plus applicable late fees, you may be able to mitigate the damage to your credit, if you make all other payments as expected.

The trouble starts when you (1) miss a payment, (2) do not pay it at all, and (3) continue to miss subsequent payments. If those actions happen, the loan falls into default.

More than 30 days late

Payments that are more than 30 days past due can trigger increasingly serious consequences:

  • The loan default may appear on your credit reports. It will likely lower your credit score, which most creditors and lenders use to review credit applications.
  • You may receive phone calls and letters from creditors demanding payment.
  • If you still do not pay, the account could be sent to collections. The debt collector seeks payment from you, sometimes using aggressive measures.

Then, the collection account can remain on your credit report for up to seven years. This action can damage your creditworthiness for future loan or credit card applications. Also, it may be a deciding factor when obtaining basic necessities, such as utilities or a mobile phone.

Other ways a default can hurt you

Hurting your credit score is reason enough to avoid a loan default. Some of the other actions creditors can take to collect payment or claim collateral are also quite serious:

  • If you default on a car loan, the creditor can repossess your car.
  • If you default on a mortgage, you could be forced to foreclose on your home.
  • In some cases, you could be sued for payment and have a court judgment entered against you.
  • You could face bankruptcy.

Any of these additional consequences can plague your credit score for years and hinder your efforts to secure your financial future.

How to avoid a loan default

Your options to avoid a loan default depend upon the type of loan you have and the nature of your personal circumstances. For example:

  • For student loans, research deferment or forbearance options. Both options permit you to temporarily stop making payments or pay a lesser amount per month.
  • For a mortgage, ask the lender if a loan modification is available. Changing the loan from an adjustable rate to a fixed rate, or extend the life of the loan so your monthly payments are smaller.

Generally, you can avoid a loan default by exercising common sense: buy only what you need and can afford, keep a steady job that earns enough income to cover your expenses, and keep the rest of your debts low.

Clean up your credit

The hard reality is that defaulting on a loan is unpleasant. It can negatively affect your credit profile for years. Through patience and perseverance, you can repair the damage to your credit and improve your standing over time.

Consulting with a credit repair law firm can help you address these issues and get your credit back on track. At Lexington Law, we offer a free credit report summary and consultation. Call us today at 1-855-255-0139.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.



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