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Get a Business Credit Card to Build Your Startup’s Credit

Jacob Lunduski

7 min. read

Updated December 3, 2024

Building business credit creates more financial opportunities for your business. Banks, lenders, and other suppliers all rely on business credit reports to assess the creditworthiness of your company.

According to the Small Business Administration, 46 percent of businesses used personal credit cards for business expenses. This statistic shows that many businesses fail to separate business and personal expenses, which is necessary to establish business credit.

Why should I use a business credit card instead of a personal credit card?

Business credit acts as your business’s financial reputation. If you can borrow money as an individual, why go through the trouble of borrowing in the name of your business?

1. Business credit cards help separate personal and business finances

If you’re looking to borrow or apply for credit or loans using your personal information for your business, you’ll use your Social Security Number. Any problems with your business would then go onto your personal credit reports, which could make it difficult to borrow for personal purchases like a home or car.

Business expenses can also use up most of your available credit to borrow as an individual. Using most of your available credit means you have a high credit card utilization percentage. Credit card utilization is the percentage of your total credit card balance you have put to use. This can negatively impact your personal credit scores quickly as utilization accounts for approximately a third of your credit scores.

Don’t forget: Your personal credit should be personal and your business credit should be solely tied to your business.

2. Business credit cards help establish a profile for your business

Business credit scores are viewable by anyone. This differs from personal credit scores, which are mostly confidential.

Your business credit scores help set up a credible professional profile for your business. You never know, your score might even help you impress future customers or vendors and help you get a business loan.

3. Business credit cards help build your business’s credit, as long as used with discipline

Like with the use of any personal credit cards, use business credit cards with discipline. Understand any card’s terms inside and out, and make sure all of your business’s payments are paid-in-full and on time. Keep your company’s credit card utilization low, and use a variety of credit for your company.

As long as you remain disciplined and develop good habits, your business’s credit scores will benefit. A solid business credit score makes it easier to operate your business. Credit card and loan providers offer better terms and financing for customers with better credit. They’ll provide more card options that may offer better rewards, benefits, and repayment terms.

4. Business credit cards provide higher credit limits than personal credit cards

On average, business credit tends to be more than double that of personal credit limits. The average credit limit of business owners is $56,100.

A higher credit limit can help your business. With expenses like taxes, location costs, equipment, office supplies, insurance, and salaries, your expenditures are sure to add up.

If you decided to use a personal business credit card for your business, you could burn through the card’s limit quickly and negatively impact your credit scores. Plus, it might be more difficult to keep your business expense records in order when tax time rolls around.

5. Business credit cards earn your business rewards

It’s important to match the features of a business credit card with the needs of your company. For many small business owners, discounts and rewards both rank high on the list of what’s important in a credit card. As you use certain business credit cards responsibly, you’ll earn value back through rewards. These rewards are usually a cash back rate or through a redeemable points system.

There are business credit cards available for bad, average, or excellent credit.

Many of these credit cards will also offer rewards in specific categories, including:

• •Business travel
• •Business-related expenses
• •Specific airlines
• •Specific hotel chains

If your business spends frequently in one of these categories, look toward one of those category-specific rewards business credit cards.  

6. Business credit cards provide your business with certain benefits

Business credit cards offer plenty of benefits besides rewards. Benefits are extra features that card issuers provide to business card holders. Although these benefits are often not advertised like rewards, they’re definitely valuable.

Your card may offer unique benefits—some common ones that come with most cards include:

• •Merchandise discounts
• •Purchase protection
• •Extended warranties
• •Travel insurance
• •Theft and damage insurance
• •Travel cancellations and accident insurance

As you decide on a card for your business, make sure you see what benefits it provides, but also pay attention to the interest rate. Ideally, you’re paying off your card in full on a monthly basis, but if you do carry a balance, you want to be sure you understand how much it will cost you in the long term.

What do you need to know about your business credit scores?

There are three business credit bureaus: Experian, Dun & Bradstreet, and Equifax. Each of these companies calculates business credit scores in their own way. Experian and D&B use a credit scoring system that ranges from 0 to 100, while Equifax’s system ranges from 101 to 816.

Although each credit reporting bureau uses a different algorithm for their scores, there are common factors used in determining a business’s credit score.

These include:

• •The number of trade experiences your business completed
• •The number of outstanding balances your business has
• •Payment habits your business shows over time
• •Credit utilization, which is the ratio of your credit card balances to credit limits
• •Demographics like years on file, Standard Industrial Classification codes, and your business’s size

How to build your business credit

Building your business credit opens up better credit card options for your business. The better your credit score, the more rewards and benefits you’ll have access to, and the better your interest rates will be.

If you want to build your business’s credit, make sure to:

1. Incorporate

Incorporate your business. This should be one of the first steps when you’re starting your business. It helps establish the profile of your business and keeps your personal liabilities and assets separate from your business.

2. Obtain an Employee Identification Number from the IRS

An employee identification number (EIN) gives your business a number for tax and credit purposes. Like incorporation, this process separates your Social Security number from your business’s credit profile. Your EIN is used for tax filing, and it’s mandatory if you have any employees.

3. Register With Dun & Bradstreet

As you apply for various funding sources like credit or loans, lenders perform a credit check on your business through Dun & Bradstreet (D&B). Registering with D&B’s database and setting up your company’s profile helps establish your business credit.

4. Open a business credit card, checking, and savings account

The last step to establish and help build a base for your business’s credit is to open a credit card, checking, and savings account in your business’s name.

You only establish business credit if the credit card issuer reports data specifically to business credit reporting agencies. Make sure to put any business credit accounts in the name of the business, again using your EIN and DUNS number. Although, it should be mentioned that even when applying with your EIN number, expect the inquiry to show up on your personal credit report as well. This is because your EIN number is connected to your SSN.

5. Manage all your finances responsibly

The most important part of building your business’s credit is to exhibit excellent financial behavior. It can’t be stressed enough how important it is to make all your business payments on time and in full if possible.

In addition, keep your credit utilization low, and use a variety of credit. If you’re not sure what your options are, in terms of financing your business, check out this guide.

Conclusion

As a business owner, establishing and building credit is essential to your business. Business credit cards provide a way for you to build your business’s credit scores as well as earn value back in the form of rewards or benefits. Also, these cards help track your spending and allow you to separate your personal expenses from your business’s expenses.

Always remember to use any business loans or credit cards with discipline. If you’re overspending and can’t pay off your loans or cards, you’ll end up spending more money than you’re saving.

Jacob Lunduski