Small business credit cards offer myriad benefits: rich rewards and cards with limits that are often higher than on personal cards. Plus, there’s an added bonus that small business owners don’t always recognize at first: A business credit card may help you build business credit.
In fact, getting one of these cards may help put your business on the map when it comes to building business credit, provided the card issuer reports information to commercial credit agencies. Not all cards have the same policy when it comes to reporting to business credit bureaus, though, and it’s important to understand how each one works. (In a separate article, we explain how business credit cards may affect a business owner’s personal credit.)
How Business Credit Card Data Ends Up on Credit Reports
There are a number of commercial credit reporting agencies in the U.S. Equifax and Experian are among the most well known. Separately, the Small Business Financial Exchange (SBFE) serves as a repository of business credit information for its members, which include major financial institutions and lenders of all types that provide financing to small businesses.
Learn more: Experian business credit report
The SBFE doesn’t compile or sell credit reports. Instead, it works with SBFE Certified Vendors, which are credit reporting agencies that are permitted to include credit information reported to the SBFE exchange in the reports they sell to members of the SBFE. SBFE Certified Vendors currently include LexisNexis and Equifax.
Credit reporting is entirely voluntary. No issuer is required to report information to credit bureaus, whether it’s personal or commercial credit information. And with business credit in particular, it can be difficult to find lenders and vendors that report. That’s why this kind of information is important.
We reached out to the major business credit card issuers and asked them where they report small business credit card data. Below is a chart that lists the results. Note that because of 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 accurate as of publish date, but issuer policies can change.)
|Bank of America||√|
Tips for Building Business Credit With Credit Cards
If one of your goals is a good business credit rating, consider getting a business credit card. Many entrepreneurs think their business has to be well-established and profitable to qualify, but that is not always the case. Card issuers are often more interested in the personal credit score of the owner who applies, and will often consider income from a variety of sources, not just the business itself.
To build strong business credit using a business credit card, make sure you:
- Pay your credit card on time. Payment history is the most important factor in personal credit scores and can be an even greater factor with business credit scores. Some business credit scoring models rely almost entirely on payment history.
- Keep balances low. Business credit reports are different than personal credit reports in several ways. One is that issuers don’t typically report credit limits. Unlike personal credit scores, where debt usage is based on the balance compared to the credit limit, with business credit the balance may be compared to the highest balance reported. Your business may appear “maxed out” more easily this way. Not all commercial credit scoring models will evaluate debt usage, but when they do, lower balances can be a benefit.
- Check credit often. Another way business credit reports are different than personal credit reports is that they do not list the name of the lender (or card issuer). As you begin to build business credit, keep track of your business credit reports to identify when one of these accounts reports. You’ll then be able to track how various accounts impact your credit history.
Credit cards can be a flexible and relatively low-cost way to borrow for your business and can offer lucrative rewards that provide additional value at no cost when you pay your balances in full. As with all types of credit, you want to be careful and cautious so you don’t put your business finances at risk. You can check your business credit for free every month on Nav.