Small business owners must try to keep their personal and business financesseparate. However, the almost invisible line that separates business credit and personal credit makes things very difficult.  Business credit cards like personal credit cards help to build your credit score, which is a very big opportunity for business owners to gain better access credit. 

Business owners are familiar with credit denials that happen when the personal credit score is below par. Therefore, maintaining a good credit score is very important to ensure that they never face problems in accessing credit that is essential to run the business. Good credit score not only opens the doors of credit but also ensures lower interest rates. Higher the credit score better is the creditworthiness of individuals, which leads to wider acceptance by lenders.

But business if full of uncertainties and there would be instances when despite the best efforts to maintain good credit history, there are occurrences that dent the credit score. If business owners seek too many credits within a short time, it is a sign of financial distress and affects the credit score negatively. Business owners with subpar credit score have the least options for getting credit cards that can harm the business prospects. But those with bad credit can take heart from the fact they too can get a new credit card.

Risk evaluation by credit card companies

Credit card companies operate based on mutual faith, assuming that all users would honor the trust that credit card companies repose on them. But they want to be sure that the person who gets a credit card is reliable enough and carries low risk in borrowing, which is why they refer to the credit score. By looking at the credit score credit card companies evaluate the creditworthiness of individuals to ascertain the risk level. Higher is the credit score lower is the risk as well as the interest rate. That is why credit card companies charge lower interest on cards issued to people with a good credit score. Credit companies look upon people with a poor credit score as potentially high risk and do not issue cards at all. Even if they do, they charge much higher interest.

As stated earlier, a poor credit score does not completely shut the door of credit cards, but there is some faint hope of getting it.  All is not lost, and it is possible to recover some of the lost ground as you will discover on reading through this article.

Understanding credit score

So far, we have talked about good and bad credit score but what kind of score is bad? There is no defined parameter as it depends on credit card companies that have varied limits. Usually, a credit score of 700 and above is considered good, and a score between 800 and 850 is excellent.  As you come down the scale, the credit card companies and lenders perceive it as a sign of increased risk, and it keeps hurting your prospects of availing credit. Having a credit score between 300 and 579 can be bad or very poor, and chances of availing credits are very bleak. Opportunities are a little better for those scoring between 580 and 669 because they belong to the category of subprime borrowers.

Factors that affect credit score negatively

A credit score is the numerical representation of your credit report based on your credit history. Many factors contribute to it, among which the extent of credit that a person carries is one of the major factors. Also, other factors have links to your behavior in handling credits and borrowing that displays the kind of financial discipline you maintain. A person who frequently applies for credit would be hurting his or her credit score as it as a sign of fiscal indiscipline that relates to less reliability of borrowers.  Court judgments and bankruptcy filing can cause serious damage to credit score with the latter wiping out the score entirely. Again, frequent change of address is a sign of instability. That can negatively impact credit score just as it can be bad when you miss payments or make late payments.

How to know your credit score

Instead of waiting for a rude shock of refusal when applying for credit cards, it would be better first to ascertain the prospects of getting cards by knowing your credit score.  Knowing the credit score helps to time the application because you can wait for some time to improve the credit score and then apply for it. A free copy of credit report is available from the credit rating agencies Equifax, Experian, and TransUnion. To place a request, you can log on to the website AnnualCreditReport.com or call the toll free number. If denied credit, you have the right to see your report within 60 days of the incident or is the report is inaccurate, or you are unemployed and on welfare. 

Build your credit score

To build your credit score, you must not only use credit cards but also be aware of the factors that have the highest impact on credit scores. Credit utilization and payment history are the top impacting factors. So, you must ensure that you pay all bills and not only credit card bills on time. Act with restraint in using credit cards and do not use more than 30% of your credit limit on any card but always try to keep it as less as possible close to 10%.

To create longer payment history, keep accounts open as far as possible. Avoid opening too many new accounts in a short period because each application dents your credit score slightly and new accounts lower your average account age. Check your credit score periodically to ensure that it is correct and if you detect mistakes, get it rectified quickly.

Having a good credit score places you in good stead in all financial matters and boosts your image as a responsible borrower. It also enables you to buy on credit the various things that you need for your personal or business requirements.