Is business credit really important when applying for a small business credit card? Yes, having a solid business credit gives you the advantage of getting easy approval from any business credit card you prefer. However, it is still possible for you to obtain a credit card for business despite the absence of business credit. How?

Your Personal Credit History Is Required

Without business credit, your personal credit history would be considered. Are you aware about the status of your personal credit? Have you checked your credit report to know if your credit rating is good enough to win you an approval?

Obviously, credit card companies prefer customers with good to excellent credit. Having good credit gives lenders more assurance that you can keep up with your payments. On the other hand, if you suffer from bad credit, banks would most likely be doubtful about your capability as cardholder.

For new business owners who plan to apply for a business credit card, it is recommended to prepare your credit first before submitting your application. If your personal credit needs improvement, you can take certain steps to raise your score to avoid getting rejected.

Personal Liability and Your Credit

You should know that since your personal credit history is used, you are also personally accountable for your business account. The personal liability clause is used by all business credit card issuers. Under this clause, the business owner would be subjected to pay all charges in his business credit card account, regardless of who made the charges.

For instance, if an employee used his supplementary card for his personal costs, you will still be liable to pay those charges. If your business fails and it becomes difficult for you to keep up with your bills, your business credit card company would be collecting debts from you, even if you have business partners.

Consequently, your personal credit history is also at stake. Late payments and unpaid bills will directly reflect in your personal credit report. Thus, even if you are diligent will all your personal accounts, if you have late payments with your business credit card, your credit score can suffer.

To be set free from personal liability and to protect your personal credit, entrepreneurs are advised to establish their business credit right away. You can do this by registering your company with Dun & Bradstreet- a business credit bureau and by obtaining a business credit card.

Within a year or two, you will be building up your business credit and eventually, you can separate your personal accounts from your business accounts. To be able to build up a solid business credit history, pay attention to your payment obligations, not just with your business credit card, but with all your creditors as well.