Which Credit Cards Can Help Build Business Credit?
Business credit is, in many ways, very similar to personal credit. Credit reports, credit scores and the way credit works — money is lent to you, which you then repay — is essentially the same for business credit as for personal credit. However, there are crucial differences that you need to understand. One of the clearest differences is that business credit reports and credit scores are totally separate from personal credit reports and scores. Lenders and credit card issuers often review your personal credit history alongside your business credit when you apply for a business loan or credit card. However, your personal credit is distinct from your business credit and the way credit scores are calculated is totally different. While your personal credit might get your foot in the door for a startup business loan , it ultimately is a reflection of you as an individual — not your business. What’s more, you cannot build business credit using your personal credit history. Building business credit comes from establishing tradelines with vendors, suppliers and lenders, and from using business credit cards all in your business’s name. So, if you’re trying to build your small business’s credit profile, read on to find out which credit cards help build business credit.
Business Credit Card Issuers and Credit Bureaus
In order to build business credit, your business needs to have its business credit history reported to business credit bureaus. Commercial or business credit bureaus are agencies to report on your business credit. Some of them overlap with personal credit bureaus while others are unique to business credit. There are three major business credit bureaus:
Each one of these agencies collects credit data and creates its own credit reports. Each of the three business credit bureaus provides its own business credit scores based on the credit reports it generates, as well as each bureau’s individual credit scoring models. The Small Business Exchange (SBFE) is often associated with business credit. However, the SBFE is not a business credit bureau and instead passes along data from lenders to four different credit reporting agencies, Dun & Bradstreet, Equifax, Experian, and LexisNexis, the last of which is not a credit bureau but collects and reports business credit activity. An important point to know about credit reporting is that is voluntary on the part of the credit card issuers. There is no legal requirement or obligation for credit card issuers to report information to credit bureaus, both for personal and business credit information. Of course, most credit card issuers generally report credit information to credit bureaus, but with business credit, the issuers often report to different credit bureaus than other credit card issuers so it’s important to understand to which credit bureau(s) your business credit card reports.
Which Credit Cards Can Help Build Business Credit?
This table breaks down which business credit cards report to Dun & Bradstreet, Equifax and Experian. All of the credit card issuers listed in the table below report to the SBFE, which is not a credit bureau, with the exception of Discover and PNC. Take note that credit card issuers don’t always publicly disclose which bureaus they report card activity to, and terms can always change. Which Business Credit Card Issuers Report to Which Business Credit Bureaus?
Credit Card Issuer
Credit Bureaus
Dun & Bradstreet
Equifax
Experian
American Express
Yes, but only delinquencies
Yes
Bank of America
Capital One
Yes
Yes
Yes
Chase
Yes
Yes
Yes
Citi
Yes
Yes
Yes
Discover
Yes
Yes
Yes
PNC
Yes
Wells Fargo
Note: Not all banks make this information publicly available on their websites and this information is subject to change at any time without notice. To verify, inquire with the credit card issuers directly. In order to build business credit, credit card issuers, lenders, vendors or suppliers must report your activity to a business credit bureau. If they do not, then your account won’t help you build business credit. What you can do is specifically request that vendors and suppliers report your credit data to the business credit agencies, but the decision to do so is ultimately up to them.
Ways to Build Business Credit With Credit Cards
If you’re looking to establish and build a good business credit rating, getting a business credit card should be one of your first steps. Often, business owners think that they won’t qualify for a business credit card because their business is only starting out and isn’t profitable yet but that’s not always the case. In fact, credit card issuers tend to be more interested in the personal credit score of the business owner who applies, since they see the business’s finances as a reflection of the owner’s financial behavior. One thing to note, however, is that if you apply for a business credit card with no established business credit, you may have to provide a personal guarantee for any credit cards or loans you take out for your business. It’s important to note that business credit score ranges differ from personal credit score ranges so it’s key you familiarize yourself with each business credit bureau’s scoring model so you have context for what a high or low business credit score might be. Here are some tips and strategies for you to help build your business credit :
- Pay on time: Just as it is with personal credit scores, your payment history is one of the most critical factors in determining your business credit scores. All business credit score models depend heavily on your credit accounts being current.
- Low credit utilization: High credit utilization — meaning, a large outstanding balance compared to your credit limit — is a common way to hurt both your personal and business credit. Business credit models vary from one commercial credit bureau to another but maintaining a low balance and thus a low credit utilization ratio can have a positive impact on your business credit.
- Open a line of credit with vendors and suppliers: When you establish a line of credit with vendors or suppliers, you’re setting up what’s called a tradeline. Business credit scores take into account your tradelines, past and present. If you establish tradelines, pay on time and the vendors or suppliers report your activity to business credit bureaus, you can use these relationships to build your business credit profile.
- Monitor your credit often: The main objective of checking your business credit often is to ensure accuracy. Credit bureaus can sometimes report inaccurate or out-of-date information about your business credit. Monitoring your business credit closely can also help you see the impact of different credit accounts on your overall score. By keeping a close eye on your business credit reports, you can see when one of your accounts reports to the bureau and the subsequent impact it has. It can also help you spot and rectify errors as soon as possible.
The Bottom Line
Establishing and building good business credit should be one of the goals of any small business. Having good business credit opens a lot of doors in terms of financing you can access, vendors and suppliers to work with and much more. Fortunately, your business doesn’t have to be super profitable or well-established to start building your business credit. Getting business credit cards is a great place to start, especially since some credit card issuers focus more on the business owner’s personal credit, which means you might be able to get a business credit card even if you’ve just launched your company. As with personal credit, using your business credit responsibly is critical to building and maintaining a good credit score. Always be cautious with spending, pay your bills on time (or early), and monitor your credit reports closely.