Small business credit cards offer numerous benefits: Rich rewards and cards with limits often higher than on personal cards. Plus, there’s an added bonus that small business owners don’t always recognize at first: a corporate credit card can help you build business credit.
In fact, getting one of these cards can help put your business on the map when it comes to building business credit, provided the card issuer passes information on to commercial credit unions. However, not all cards have the same policies when it comes to reporting to corporate credit bureaus, and it’s important to understand how each card works. (We explain in a separate article how business credit cards can affect a business owner’s personal credit.)
How business credit card information ends up on credit reports
There are a number of commercial credit reference agencies in the US. Equifax and Experian are among the best known. Separately, the Small Business Financial Exchange (SBFE) serves as a repository of business credit information for its members, including major financial institutions and all types of lenders that provide financing to small businesses.
Find out more: Experian Business Credit Report
The SBFE does not make or sell credit reports. Instead, it works with SBFE certified suppliers, credit reporting agencies that may include credit information reported to the SBFE exchange in the reports they sell to members of the SBFE. SBFE certified suppliers currently include LexisNexis and Equifax.
Credit reporting is completely voluntary. No publisher is required to report information to credit bureaus, be it personal or commercial credit information. And especially with business loans, it can be difficult to find lenders and sellers who report. That’s why this kind of information is important.
We contacted the major corporate credit card issuers and asked them where they report small business credit card information. Below is a graph with the results. Note that due to the SBFE Certified Vendor model, information reported to SBFE may also be included in reports compiled by SBFE Certified Vendors. (Editor’s Note: This chart is correct at the date of publication, but publisher policies are subject to change.)
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Tips for Building Business Credit With Credit Cards
If one of your goals is good business credit, consider buying a business credit card. Many entrepreneurs believe their business needs to be established and profitable to be eligible, but that’s not always the case. Card issuers are often more interested in the personal credit score of the owner submitting an application, and often consider income from a variety of sources, not just the business itself.
To build strong business credit with a business credit card, you must:
- Pay your credit card on time. Payment history is the most important factor in personal credit scores and can be an even greater factor in business credit scores. Some business credit score models rely almost entirely on payment history.
- Keep balances low. Business credit reports differ from personal credit reports in several ways. One is that issuers do not typically report credit limits. Unlike personal credit scores, where the debt utilization is based on the balance versus the credit limit, in business credit, the balance can be compared to the highest reported balance. This way, your business can look easier. Not all commercial credit score models will evaluate debt usage, but when they do, lower balances can be an advantage.
- Check the credit often. Another way that business credit reports differ from personal credit reports is that they do not list the name of the lender (or card issuer). When you start building business credit, keep your business credit reports to identify when one of these accounts reports. You can then see how different accounts affect your credit history.
Credit cards can be a flexible and relatively inexpensive way to borrow for your business and can provide lucrative rewards that add value at no cost when you pay off your balance in full. As with all types of credit, you want to be careful and careful so that you don’t endanger your business finances. You can check your business credit every month for free on Nav.
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