Updated: Feb 3, 2022
One of the most common questions I get asked every week during our free consultations is about qualifying for a corporate credit card that won't require a personal guaranty, so I wanted to provide some very basic tips to help get you to that goal.
It's pretty common knowledge that a lot rides on your corporate credit report, but there are also other factors that you need to address on the personal side if you want to get the best results when applying for business credit. While the goal is to keep from having to personally guarantee any credit, you need to understand that your personal credit report will have an impact on being able to achieve that goal, even if only to gauge your credibility.
And just a quick reminder: You may be required to provide your social security number, but that does not mean you will be required to personally guarantee the credit card account.
But let's cover each of the four primary factors for approval so you can understand where you stand and how to improve your potential.
Your Business Credit Report
Your business credit report needs to reflect the best possible information about your company, including up-to-date location and contact information, income and industry details, and specifics about your employee count and principals. You can update this information for free by registering for the free DUNS Manager on D&B's website.
Full scores and ratings also must be presented. You need all of your business credit scores to be present and (preferably) in positive condition. To achieve this, you need to:
a) dispute any negative information from your corporate credit report, and
b) add positive trade payment history to the file.
Disputed information may return to your file at some point, so you will want to keep an eye out for changes to the scores as you make progress.
Your Personal Credit Scores
Because creditors will get their best indicator about how you are going to handle business credit from how well you manage your personal credit, you may also need to do some clean up to insure you get the highest approvals. Slow payments should not remain on your file for more than seven years even if they have been turned over for collection. Disputing negative information from your personal credit report is not difficult. and can often result in a vast improvement to your scores.
Generally, your personal credit scores will need to be 650 or above before you will meet the criteria to be considered for a business credit card. If you can launch disputes that result in just 25% of the items being removed, you might be able to raise your personal scores by 50 points or more.
Recent Late Payments
Even if your personal and business scores are high, you also need to make sure there are no recent late payments being reported. While all slow pays affect your score to some degree, older slow pay history impacts your scores less than those that have been reported within the past 6 months.
The typical bad-credit-spiral begins with one or two payments being paid beyond terms or left unpaid altogether. If you are planning on applying for business credit, it's important that you have no slow payments within the last six months on either your business or personal credit files.
While you may be able to dispute a slow payment completely off your file, some slow payments will return the next time the creditor reports to the bureau. You can lower the weight of that slow payment by purchasing from the same supplier again and making the new payment on time. This can lower the weight from 100% slow to 50% or less very quickly. It helps to prove that you didn't always pay the supplier slowly, but just had a minor infraction.
New Credit Inquiries
Inquiries can occur any time you apply for credit and generally make up about 10% of your credit score. New applications will count as a new inquiry, but inquiries launched by your current creditors as a part of their regular monitoring of your file or decision-making process should not, such as when they are considering boosting your current available credit line.
If you want to prepare your credit file in advance for a high approval credit card, you should make sure there are no new personal credit inquiries for at least 4 months. This one step can boost your potential for approval by up to 25%.
An added note:
If you have any questions about what you can do to improve your possible credit card approvals, reach out to me directly to schedule a personalized corporate credit review. In most cases, I can provide quick tips and tricks over the phone that will get you to your goals much faster.