Whether your business is small, large, new, or well-established, there’s no guarantee that your business credit card application will be approved. There are five reasons why your credit card application may be rejected—namely credit score issues, poor personal credit history, verification issues from the issuing bank, too many credit card applications, and not enough income. We discuss each and include actionable steps to improve your chances of getting approved for a credit card.
1. Credit Score Issues
Business credit score is important when it comes to applying for a business credit card. Most cards require at least good standing, such as credit scores ranging from 670 to 739, to qualify.
Several factors could affect your credit score, like if you have been:
- Paying your credit card bills late
- Incurring too much credit card debt
2. Poor Personal Credit History
Card Issuers often use your personal credit history to determine whether you qualify for the card. So, having a poor personal credit history may affect your chances of getting a card.
Your options would then be limited to either a secured business credit card or a business prepaid card—with the secured business credit card requiring a security deposit to get one, and a business prepaid card requiring existing balances on your account to qualify.
3. Issuing Banks May Have Verification Issues With Your Business Details
There is certain information that you will need to fill out when applying for a business credit card. Often, issuing banks may have difficulties in verifying certain information as you may have incorrectly inputted the following:
- Business name: If you’re a sole proprietor, you may apply for a business credit card with your legal name while limited liability companies (LLCs), corporations, and partnerships would need to put their legal business name on the application. Note that the business name must be the name registered with the state.
- Employer identification number (EIN) An EIN is used to identify a business entity. Also called a Federal Tax Identification Number, this is offered by the Internal Revenue Service and is used for tax reporting purposes. Note that an EIN must be secured immediately. : Sole proprietors are not required to have an EIN when applying for a business credit card. Meanwhile, corporations, LLCs, and partnerships would need to secure an EIN to notify the issuing banks that they’re legitimate business owners. Read our article to learn how to get an EIN for your business.
- Entity status: On your application, you must indicate if you’re a sole proprietor, LLC, corporation, or partnership. Issuing banks may deny your application if you cannot include an entity status.
- Business phone number: Whether you’re a sole proprietor or a corporation, you are required to put in an active business phone number for issuing banks to get in touch with you.
- Commercial address: While sole proprietors can apply for a business credit card using their home address, LLCs, corporations, and partnerships are required to put in their commercial address. Post office boxes and residential addresses are not allowed for LLCs, corporations, and partnerships.
4. Too Many Credit Card Applications
Issuing banks may deny your credit card application if they notice you’re applying for more than one credit card. This is because applying for new credit cards within a single day will create a hard inquiry on your credit report. Issuing banks would then consider you to be a risk, as those with more than six credit inquiries may be more than likely to file for bankruptcy.
5. Not Enough Income
According to the Credit CARD Act of 2009, should the business owner not meet the income needed for any debt that they may incur and have a high debt-to-income (DTI) ratio, they will not qualify for their chosen business credit card.
What To Do After Getting Denied for a Business Credit Card
There are actions that you can take immediately after receiving a denial letter from the card issuer. Some of these include:
- Asking the issuing bank to reconsider: You may call the bank to reconsider your application by providing more information.
- Reviewing credit reports: Read all relevant information included in the report to give you a better idea of your credit standing. Doing so can help determine the areas in which you can improve.
- Contacting credit bureaus for a dispute: You can contact the credit bureaus for any inaccurate credit information included in your report. Once any inaccuracies are identified, you may have them removed from your credit reports.
How To Increase My Chances of Getting a Business Credit Card
There are multiple ways to increase your chances of getting a business credit card. The majority of these can help resolve the reasons why you were denied one in the first place.
- Ensure to pay in full and on time: Paying your credit card balances in full can help convince the issuing bank that your business is stable and is free from the risk of filing for bankruptcy.
- Reduce credit utilization ratio: You can determine your credit utilization ratio by dividing the amount of revolving credit you’ve used by your total available credit. This can help issuing banks determine how business owners can manage current debt. As a general rule of thumb, having a credit utilization ratio anywhere from 0% to 30% is considered good, while having a credit utilization ratio over 30% means that you are overspending and not making large enough payments.
- Closely monitor your credit scores: Review your credit scores every three months, which can help ensure that your credit score is improving.
- Reduce existing debts: Ensuring that your DTI ratio is consistently low would mean that you can handle potential debt, such as a new business credit card.
We have expert-approved business credit card tips that may interest you. Each tip can help you avoid common credit card pitfalls so that you can take advantage of the benefits of your business credit card.
Frequently Asked Questions (FAQs)
In case you get denied a business credit card, there are alternative cards you can consider, namely:
- Secured business credit card: This can be used by business owners to rebuild their business credit history and credit score, and getting one requires a security deposit. For recommendations, check our list of the best secured business credit cards.
- Business prepaid card: This requires you to load money on an existing account before making any purchase. You can learn more about a business prepaid card and how it works and see our guide to the best business prepaid cards for options.
No, it won’t. However, note that applying for any business credit card will result in a hard inquiry on your credit report.
Getting denied for a business credit card may be disheartening. Understanding why you got denied and identifying concrete steps can help increase your chances of securing a business credit card. Taking these steps can help not only reduce your credit utilization ratio but also get your credit card application approved.