Many businesses have been using secured credit cards in order to repair their business credit history and increase their credit score. Like individual credit scores, a business that experiences tough financial times may see their credit score drop, and as a result, they may be unable to obtain an affordable line of credit in order to rebuild their score.
There has been an outcry by many small businesses for small business loans or other forms of capital, like business credit cards, so that they can grow and expand their companies, not to mention hire more workers. However, business lending has been slow and as a result many companies have suffered and seen their credit score drop. Yet, those lucky small businesses that have been able to land on their feet are in a position where they can rebuild their credit score, if only they had access to credit to do so.
While many companies are reliant upon credit cards and small businesses often have at least one small business credit card account, oftentimes a business that has seen their credit score drop will either have interest rates that are unaffordable on their current cards or they simply cannot gain access to the credit they need to make purchases, pay them off, and rebuild their credit history. This is very similar to many individual credit card holders who, due to a variety of factors, have seen their credit scores drop and their credit history suffer as a result of the inability to pay their debts.
Yet, many reputable lenders offer secured credit cards for businesses or other forms of business credit cards that may be beneficial for helping a company increase their credit score. A secured credit card can be used just like any other card but the cardholder must deposit a sum of money into a bank account that sets the credit limit and secures the bank in case the cardholder refuses to or cannot pay off their charges. Secured credit cards are a common way in which many bad credit borrowers repair their credit history and increase their credit score, and can be a valuable tool when used properly.
A secured credit card is not a guarantee to a better credit score but businesses and individuals alike can make smart purchases with this card, budget correctly, and eventually build a better credit history if they pay off their purchases in a timely manner. Smart financial habits will be required before a secured credit card will be of any use to the cardholder, but also finding a reputable lender for the secured credit card will also be necessary. There are some financial institutions that may charge excessive fees and fines on these types of cards, which would obviously work against the cardholder so businesses need to be wary.
By researching secured credit card offers, banking with a reputable lender, and making smart financial decisions when using a secured credit card, many businesses have been able to increase their credit score over the past months in this manner. Some companies, just like with individual cardholders, are even offered unsecured cards if they prove that they are safe credit risk. Yet again, since there is no guarantee when it comes to rebuilding one’s credit history and score, a secured credit card should be used with caution and obviously only obtained by a business that is in the financial position to use this card to their advantage.