If you are thinking of starting a new business or have already established one, you will need a business credit card.
A business credit card, also known as an SME credit card, is essentially a credit card but only for businesses. However, unlike credit cards which are used for personal expenses, business credit cards are used only for business expenses.
These types of cards also help you earn lucrative rewards every time you use them. Moreover, making all business-related purchases on the card can help make tracking expenses easier, especially during tax season. It’s important to keep your personal and business expenses separate for that reason alone.
However, your business credit and personal credit will still influence each other even if your expenses are separate.
Like many other SME lending instruments, SME credit cards, too, have the potential to make an impact on your personal credit score. This impact depends on several factors like:
– Application and usage
– Payment delays
– Credit utilization
Impact of SME credit card application
When you apply for a new SME credit card like founderscard, the card issuer will likely check your personal credit report and score. A hard credit inquiry like this can temporarily lower your credit score but only slightly.
The credit score may be impacted by hard inquiries for up to 12 months. Compared to other factors like payment history, they typically don’t carry much weight on personal credit scores.
Impact of late payment
Most SME credit card issuers only report to the personal credit reports of the business owner when there is a problem. There is a genuine chance that the business credit card could appear on your credit report if your business makes late payments or defaults on its obligations.
When it comes to credit scores, late payments can be a cause of worry. Especially, if your card issuer informs the commercial and consumer credit bureaus that you made a late payment. There is a chance it may lower both your personal and business credit scores.
Impact of credit utilization
Credit utilization ratio is the credit value that is used every month compared to the credit available to you. Both your business and personal credit scores can be negatively impacted by a high credit utilization ratio. A high credit utilization ratio lowers your credit score. A score of 30% is generally considered decent.
An SME credit card can be a highly beneficial tool for your business. As with any credit tool, you will have to use it smartly and wisely in order to make sure you don’t go into debt as well as ruin your credit score.
In case you’re looking for funding for your business expenses, founderscard may be a good option for you. It offers high credit scores along with 51 days of interest-free credit for SMEs. Aside from that, it offers 3x rewards on all purchases made with the card, which can be redeemed for rewards relevant to the business. Know more and get started today by visiting founderscard.in
