10 Reasons Why You Were Denied a Business Credit Card
A small business credit card can reduce cash flow problems and separate business expenses from personal expenses.
And the best part:
You don’t have to be a large company to qualify for one.
Although business credit cards are more accessible than some think, there’s no guarantee that you’ll get approved.
A rejection letter can be discouraging, but don’t give up. Understanding the reason behind a denial is how you’re able to get future credit.
So if your business has been recently turned down, here’s a look at top reasons for the rejection, and what you can do.
1. Banks Can’t Verify Your Business Name
If you’re a sole proprietor applying for a business credit card, you can apply using your legal name.
But if you’re an LLC, corporation, or partnership, you’ll need to put your legal business name on the application.
The credit card issuer will verify this information with your state government.
If the business name on your application doesn’t match the name registered with the state, the bank isn’t likely to approve your application.
So make sure you state your business name clearly and accurately.
2. Your Business Isn’t In Good Standing With the State Government
Keep in mind:
Some banks require registered businesses to have a Certificate of Good Standing with their state department.
This applies if you’ve registered a corporation, an LLC, or a partnership.
This means that your company’s paperwork is up-to-date and that you’ve paid all yearly renewal fees.
It also means that you’re legally allowed to conduct business in the state.
Businesses that don’t have this certificate aren’t in compliance with state regulations.
And because of this negative status, you might be denied a business credit card.
3. You Don’t Have an Employee Identification Number (EIN)
If you’re a sole proprietor, you aren’t required to have an employer identification number (EIN) when applying for a business credit card.
You can apply using your Social Security number only.
You are, however, required to provide this nine-digit number if you’re a corporation, LLC, or partnership.
An EIN is a unique number the Internal Revenue Service assigns to businesses in the United States for tax reporting purposes. This number also indicates that you’re a legit business owner.
If you don’t provide an EIN on the credit card application, the bank can’t verify your business and it’ll reject your application.
4. The Bank Can’t Verify Your Business Phone Number
Business credit card applications also ask for a business phone number. This information allows the issuing bank to get in contact with you.
Depending on the bank, an underwriter may verify this number by calling the business, and they may even confirm whether the number is listed with 411.
Having a non-listed telephone number, or having a different number attached to the business can raise red flags and hurt your approval chances.
If you haven’t already, list your phone number with telephone directories, and make sure existing listings are accurate.
5. Your Business Doesn’t Have a Commercial Address
Sole proprietors can apply for a business credit card using their home address.
The rules are different, though, if you have an LLC, corporation, or partnership.
With these types of businesses, getting business credit often requires a commercial address.
Some card issuers do not allow P.O. Boxes or residential locations.
6. You Haven’t Been in Business Long Enough
There are no hard or fast rules regarding how long you have to be in business to qualify for a business credit card.
Each issuing lender has its own requirements, so it might be possible to get approved after being in business for a few months.
Some banks, though, require a minimum of two years in business.
Therefore, read the fine print on credit card applications so that you understand the terms and conditions. This way, you apply for a credit card that’s right for you.
7. You Don’t Have a Business Credit Report
You might be rejected for a business credit card if you don’t have a business credit profile.
You can establish a credit file through Dun and Bradstreet and business credit bureaus like Experian Business and Equifax Business.
To create a Dun and Bradstreet profile, you’ll first need to register your business with Dun and Bradstreet and then request a D-U-N-S number. This serves as a Social Security number for your business.
To build business credit with the bureaus, contact Experian and Equifax to set up a business profile. If you have an existing profile, make sure your information is accurate before applying for a business credit card.
8. You Have a Thin Credit Profile
A thin credit profile is another roadblock to getting a business credit card.
This might be the case if you’re new to the credit world, and haven’t had enough time to build a strong credit score.
At this point, banks can’t gauge creditworthiness.
You’ll have to build up your credit report before you’re eligible for a business credit card.
9. You Have a Low Credit Score
Then again, maybe the problem isn’t lack of a lengthy credit history, but rather a less-than-perfect credit score.
Factors that decrease credit scores include paying bills late, applying for too much credit in a short span of time, and having high credit card debt.
When applying for a business credit card, banks don’t only check your business credit profile, many applications also require your Social Security number. This gives them authorization to check your personal credit, too.
If your business and/or personal credit score is too low and doesn’t meet the bank’s minimum requirement, you’re not likely to get a credit card.
10. You Didn’t Provide an Entity Status
Leaving out pertinent details can also cause a rejection, so make sure you complete the application.
You must provide the type of business, such as sole proprietor, partnership, LLC, etc.
If you don’t include an entity status, the bank may deny your application.
How to Improve Your Chances of Getting a Business Credit Card
But although numerous factors can prevent getting approved for a business credit card, you can improve your odds.
1. Review your personal and business credit reports
Before applying for business credit, get copies of your business and personal credit reports.
Every consumer is entitled to one free credit report annually from each of the bureaus. You can request copies from each bureau separately, or get all three reports from AnnualCreditReport.com
You can also get a copy of your Equifax and Experian business credit reports, and your Dun and Bradstreet report for a fee.
2. Ask the credit card company to reconsider
Additionally, you can plead your case and ask the credit card company to reconsider.
Quite frequently, computers deny credit card applications.
When a human takes a closer look, they may decide that you’re eligible and manually approve the application.
If you’re denied because of missing information, a human can also verify this, and give you an opportunity to update the application.
When appealing a rejection, though, you’ll need to present a strong case.
Maybe you left off household income, or accidentally provided inaccurate information regarding years in business, company address, identification numbers, etc.
3. Improve your credit score
On the other hand, if you’re denied because of a low personal or business credit score, asking for reconsideration might not work in your favor.
The best thing you can do:
Fix your personal and business credit, and re-apply at another time.
Pay your bills on time and pay down existing debt. As your credit habits improve, so does your credit score, which opens the door to business credit.
As your credit habits improve, so does your credit score, which opens the door to business credit.
4. Consider other options for a business credit card
The good news is that some business credit cards are designed specifically for those with low and fair credit scores.
If you’re denied, look into getting a secured card for small business owners. These work just like any other credit card.
The difference is:
You’re required to pay a security deposit before you can access a line of credit. You’ll receive a credit line that’s equivalent to the security deposit.
Make sure you get a secured business credit card from a bank that reports to the business credit bureaus.
Getting a business credit card not only separates personal expenses from business expenses, but it can also give your business credibility.
Yet, not everyone who applies gets approved.
If you’re denied, you’ll receive an adverse action notice explaining the reason.
But you can call the bank for further explanation.
From here, take the necessary steps to boost your credit profile.
By doing so, you’ll build a stronger credit score, allowing you to get approved for credit cards and business loans in the future.