Your business credit card could be the reason you are getting declined for personal card applications. Fix it now

How your business credit card could be holding you back

  • Personal liability business credit cards can affect your capacity for a new personal credit card.
  • Business owners and company directors are personally liable for the management of the company’s credit card.
  • Take steps to separate your business credit activity from your personal finances and learn how to side-step application approval problems.

You run a growing business with more than two years of trade under your belt. Your personal income is strong and you have an excellent credit score. What could possibly make you get knocked back for a personal credit card? 

Your business.

That’s right, your business. Here’s how. When your company’s business credit card account is in your personal name, not the company's, you are personally liable for what happens to the account.

Employees who are given supplementary cards don’t have their credit capacity to borrow money on a loan or card affected in the same way as the business owner or director, because they aren’t personally liable for the monthly credit card bill. But you are.

The company owner, founder or top executive is on the hook for paying the monthly credit card bill if the company doesn’t pay.

This personal liability will most likely impact your ability to access loans, or other credit products like credit cards, for your own personal use. So if the company purchases are run through your personal card, and you are the one guaranteeing the card, then your ability to access more credit might be slated.

Real Example

Businessman

One executive we spoke to told of how he was recently declined for an attractive personal credit card well within his grasp. His business is a Pty Ltd and run separately to his personal finances. He had more than met the minimum credit criteria on all points: age, taxable income and credit score.

It turns out that the credit card rejection came down to his credit capacity. Here’s how.

His company has a large unsecured credit limit for which he is personally liable. So when he applied for a new personal credit card from a bank where he has never been a customer, the robots and advanced decision-making software slapped on top of legacy systems looked at his credit profile and said, "This guy has good income and an excellent credit score, but 'looks' way overextended on his unsecured lending, so we’d better decline his application". Unless the new bank digs deeper to understand the customer's situation, it appears unsuitable to approve his application.

The decision to decline happened because there’s a large unsecured credit limit for which this guy is personally liable.

Of course, if a real person in a credit assessment team had dug a little deeper to understand the situation, and maybe requested a supporting letter from the company accountant, then the application would be approved, no problem.

Banks that you are new to cannot see your full financial history at other banks. At least for now, until Open Banking kicks in. 

How to fix this

Take steps to untangle your business activity from your personal credit products, so that directors can still get personal loans and credit cards.

Or, if there is another director in the business who can take personal liability for the card, then ask them to step up to the plate.

Be careful how you apply for cards. Apply online, but be ready to call up straight away to send a supporting letter from the company accountant to the new bank to explain the situation.

And depending on the size of your business it may be time to progress to a corporate card account, where the company, not the business owners, takes on the liability.

What to do if your credit card application has been declined

A declined credit card application is not a final “no”, set in concrete forever. It’s just a “no” for now, under the circumstances and in light of the data presented to the lender.

Call up the credit card issuer that declined your application and find out the reason for the decision to reject it. They probably can’t or won’t tell you exactly why, but they should be able to give you a few clues as to why you might have been declined. You should challenge their decision.

Check your personal credit score for free and ensure that it’s OK before applying anywhere else. Don’t apply for another card at the same lender for at least three months.

If you really want a personal credit card from a new bank then do a joint application with your life partner since they are likely to be outside your business. Your husband or wife can be listed as the main applicant, and assuming they meet the minimum credit criteria you can become a supplementary card holder.

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