When applying for a business credit card, several points must be taken into account since some include benefits for associating with the financial entity, such as bonuses for new customers or different types of rewards programs, with which points can be added to obtain prizes.
However, a distinction must be made between credit companies that report to the customer on the commercial credit card, through which the credit or loan payment behavior is recorded in the customer’s personal credit history. In contrast, other entities report on their commercial credit history.
How does Personal Credit influences Credit Cards?
When small businesses apply for a business credit card, the issuer of that card will be queried for your credit score. This process is usually temporary and short-lived, as many lending institutions use the applicant’s personal credit to approve or disapprove the application.
One of the conditions imposed by the files of these commercial cards is the request for a personal guarantee by the applicant so that the lender can verify that the entrepreneur will be the one to pay the total amount of the debt in case a business is unsuccessful.
In this way, banks and lenders can corroborate the applicant’s credit history to assess the applicant’s ability to repay the loan in full and the risk that the institution may run if the debt is not refunded.
Why should I have a Business Credit Card that does not report Personal Credit?
Business credit card issuers will make a brief. Still, intense inquiry about who will be the beneficiary of the business credit card, and while it is a complicated process, most institutions will only report the activities of the various business credit institutions.
It will only be possible if the applicant has a positive credit history, i.e., entrepreneurs with debts and late payments, which will negatively impact their personal credit. An excellent option for small and medium-sized businesses is to apply for a Business Credit Card that doesn’t report Personal Credit.
Pros and cons of having Business Credit Cards that do not report to Personal Credit
Business Credit Cards that do not report to Personal Credit can be beneficial and misleading if you do not keep track of your expenses.
Disadvantages of Business Credit Cards that do not report to Personal Credit
A personal guarantee is required from the applicant
Usually, cards that do not report to personal credit require a unique deposit. In the event of non-payment or delinquencies, the applicant can be contacted to pay what is owed, and if not, the company’s debts will become the business owner’s personal debts.
No possibility of applying for a personal credit
When taking out a commercial credit card, the beneficiary must pay all monthly debts in due time and form so that his or her credit history is clean and, thus, obtain more significant benefits and score points for his or her good behavior. Even if the applicant has the best credit profile, he/she will not be able to improve his/her personal credit history since this is a commercial card only.
Distinction from personal credit
Although it may be a disadvantage that the excellent credit behavior of the commercial card does not contribute to your personal credit, it can also be a great advantage since the applicant will be able to differentiate between personal and commercial credit in case he/she wants to separate his/her business from his/her personal expenses.
Low credit utilization rate
Business credit card creditors tend to obtain higher balances and accrued benefits, which helps to increase further and maintain credit utilization. A low credit utilization ratio will influence a strong score on a personal level.
Can a Business Credit Card be obtained without a credit check?
When applying for a business credit card for a start-up business, the bank will ask the business owner to provide a personal guarantee in case the company does not work and cannot pay the business credit card costs. This guarantee is a way for the bank to ensure that the applicant is committed to delivering the cards with his own money in case his business does not work.
A personal credit check is required beforehand to verify that the applicant is eligible for a business card. While this is optional for all banks, most do this to ensure that their client can pay in case of possible debts.
Over time, the entrepreneur will begin to build his or her business credit and, after several transactions, can apply for personal credit if he or she so desires. The entrepreneur will need to obtain a good score and behavior; otherwise, he will tarnish his credit profile, and his future finances will suffer.
How to get a Business Credit Card with no credit check?
Those entrepreneurs with a bad credit history or who do not intend to check their credit can opt for one of the cards that do not have a credit check.
Secured cards can be applied for after the applicant passes a credit check. Individuals eligible to obtain one of these cards but with a bad credit profile due to non-payment may opt to get a secured card.
Corporate cards are an excellent option for people with a clean credit profile and whose cards have been used for a while and have more than a million in revenue since they started using the card. Business owners who have lower incomes or are just beginning to use this means of payment will not qualify for a corporate credit card.
Non-business credit cards
If you prefer to opt for a non-business credit card for your business, you can apply for a personal credit card, but this will not bring the benefits of a corporate card. For example, it does not offer employee carding capabilities, or the credit they offer is limited and generally too low for what a company would need.
Non-business cards that do not require credit checks, or personal cards, may help an entrepreneur’s finances but do not ensure business growth.
Business debit cards
Debit cards differ from credit cards because they have cash in a checking account and, for example, do not allow payment in installments, which is possible with credit cards. Business debit cards enable employers to keep track of their movements and the transactions made by employees since no credit check is requested before the plastic is used.
Top 5 Best Business Credit Cards that do not report to Personal Credit
Several banks and credit institutions grant credit cards without reporting personal credit. Among them, we can distinguish the following:
The Brex card is exclusively designed for companies and employees, and the cardholder doesn’t need a clean credit history. Still, these values are measured according to the cash balance on the card, expenses, or investments made by the company. This card is perfect for those small companies that are just starting their career and, therefore, do not have an extensive credit profile. One of the essential points to note about this card is that the company wishing to partner with Brex must have good secured capital.
Chime Credit Builder Visa®
Chime is a free account that allows employees to receive direct deposits. You only need to have received a minimum deposit of $200 in at least 265 days to be eligible to apply for this plastic. An advantage of Chime Credit Builder Visa® is that they do not require an upfront opening deposit, which sets it apart from other commercial cards.
OpenSky® Secured Visa®
This secured credit card does not require a credit check from its customers, nor does it need a bank account; instead, payments and transactions can be made from Western Union or money order. In addition, OpenSky® Secured Visa® charges a single annual fee.
First National Bank Business Edition® Secured Mastercard®
While this card requires a credit check, the financial institution allows its customers to pre-qualify for a credit card without altering their credit score, making it ideal for businesses with poor credit history. First National Bank Business Edition® Secured Mastercard® charges an annual maintenance fee, and the initial deposit will earn interest.
Capital One® Spark® Classic for Business
While Capital One® Spark® Classic for Business requires a credit check, you do not need an excellent credit profile, just an average or fair credit history.
Remember to contact each bank so that they can advise you and inform you correctly about what each credit card offers.
- “Best Business Credit Cards for No Credit | The Ascent.” The Motley Fool, 10 Mar. 2022, https://www.fool.com/the-ascent/credit-cards/best-no-credit-business-credit-cards/.
- “All You Need to Know about Credit Reporting on Business Cards – Doctor Of Credit.” Doctor Of Credit, https://www.facebook.com/doctorofcredit/, 24 Feb. 2021, https://www.doctorofcredit.com/which-business-credit-cards-report/.
- Formoso, Benilyn. “7 Best Business Credit Cards That Don’t Report to Personal Credit for 2022.” Fit Small Business, Fit Small Business, 17 June 2022, https://fitsmallbusiness.com/business-credit-cards-dont-report-personal-credit/.