Getting a business credit card is a lot more than what many think about. Without knowing it, you may have already stepped on multiple landmines that ruin your chance of getting one, or if you did, then you may have gotten one wrong. In this episode, Merrill Chandler reveals the seven ways in which you may have miscalculated getting business credit cards and what you can do about it and go from there. He breaks down some important errors to watch out for and some questions you need to be asking before making that decision.
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7 Fatal Mistakes Almost Everyone Makes When Choosing a Business Credit Card
We’re going to be talking about the seven ways that you may have completely blown it on how to get business credit cards and you didn’t even know.
Enticed To Get A Business Credit Card
We’re talking about the seven ways in which you may have completely miscalculated, didn’t know or stepped on a landmine. The seven ways in which you may have completely failed to know how to get the right business credit cards. We’re going to cover those and we’re going to be talking about not just the errors to watch out for and the landmines to avoid, we’re also going to be talking about what to do about it and how we can go from there. Let’s take a look at the common practice out there, the way we’ve been trained or the way we backed into it without even knowing. These are not in order of importance. I’m going to count up through seven of them.
The first way that you may have run into a problem with business credit cards or chosen the wrong business credit card is that you were enticed to get a business credit card, and that business credit card reports to your personal profile. There are numbers of them and we’ll talk about that on how to do it right. The first thing is there’s a Spark card that’s offered by Capital One. There are a couple of different cards. Any business card offered through Capital One is a no-no because these cards, while they say business on it, they report to your personal profile.
If this is your first episode, go back and binge so you can get up to date on all of the amazing intel that you need to become fundable and to make the right business funding decisions. In this case, if you’ve got a Capital One Spark card or any other business card from Capital One, it says business all over it. On the statements, on the cards, on everything, but it’s not a true business credit card because it reports to your personal profile. Here’s the thing. As business owners, entrepreneurs and real estate investors, we want to use our business credit cards because we get points, we get miles or more importantly, we can track our write-offs.
We’re thinking, I got a Capital One business card Spark card or whatever. I’m going to be able to write off everything that I charge onto this card. Here’s the problem. Every time you use it, your personal profile is affected. Have you ever noticed, when you raise your balances, when you charge up on your personal cards, your score goes down? Your personal fundability goes down. You think you’re being a good borrower, a good businessman or businesswoman. You get a Spark card and you start using it, but it harms your personal profile. It harms the goose that lays the golden egg, which is what we call your personal profile. You’re cooking your goose. There are several examples in American Express, but another one is Discover. Discover has a business card or so it says.Did you know there's a difference between a credit card and a charge card? #GetFundable Click To Tweet
Using Suggested Offers On Websites
That business card reports to your personal. Every time you use it for business reasons, you’re lowering your score, lowering your fundability and lowering your chances of looking attractive and fundable to a business lender. Number one, you chose a card that reports to your personal, no bueno. We’ll solve all this as you read to the end of this episode. The second way that we pull the rug out from underneath us. The second landmine we step on is you use the suggested offers that are mentioned on websites. Two of the most famous website are Credit Karma on the personal side and now on the business side. Here’s the problem, they’re not looking out for your fundability.
The cards that they recommend are listed in the order of how much money they make by referring you. When you click on that card or that icon or that link, you’re going over there and they’re tracking it. When you fill it out, they get credit for it. They’re not looking for your personal fundability, they’re not supporting your desires to build good banking relationships with lenders so that you can get credit cards, business credit lines or business loans. Each time that you follow one of these links, you’re likely to be sent to a card that also reports to your personal. It’s not always, but if you go to Credit Karma. First of all, they’re using a FAKO score, but when you search for business cards, the vast majority of the cards that they refer you to report on your personal.
When you go to Nav, it promotes, “We want to get you business funding.” Most of the cards or at least the top few of the cards, the highest yield for their pocketbook are cards that will end up reporting to your personal profile. Number 1 and 2 go together, but you’re being suggested an offer because you’re on a site that’s giving you a free score or giving you neat little articles to read. Since you’re there, you click the link, you look it up. If you apply, the likelihood is that you’re going to harm your fundability, harm your personal profile because you’re following their suggested offers. That’s number two.
Responding To Mailed Offers
Number three, similar to number two is that you respond to mailed offers. How many of you are getting 1 to 5 offers a week from different lenders saying, “We have a special. Do this thing. Chase has a big thing. Open up this card and we’ll give you $300 credit?” There are all kinds of offers that are being offered. Here’s the problem. In these offers, there’s a code you have to respond to. That code can be called a promo code. They get ingenious about this like promo code, an activation code, your user ID.
They try and avoid the fact that they’re tracking you. Think of it this way. That tracking code puts you on a list and these guys are susceptible to offers. We want them to accept ours, but we don’t want to offer them anything because they always say yes. They load their credit profile up with these offers because some people want credit cards. They’re not using a strategic process to create fundability. They’re saying yes. You look like a consumer. You look like you respond to offers and you end up on a gray list. This gray list is all the people to not be taken seriously. Those actual inquiries count against you more than regular inquiries do. It’s like everybody wants to get into the party but shut the door after you get in. You get to enjoy it, but nobody gets to follow you. That’s what these promo codes are designed to do. That is number three. Mailing offers are as treacherous to your fundability and it’s more landmines to step on if you’re taking advantage of mail-in offers.
Choosing A Low-Value Card Over A High-Value Card
The fourth way in which you may have pulled the rug out from underneath you is that you chose a low-value card over a high-value card. If you haven’t been to this and if you’re new here, make sure you go back to the other episodes. At one particular, we talk about bank tiers. There are four levels of banks. Tier 1 through 4. Tier four, I call them predatory lenders, but it’s like hard money. You get docked by FICO for having a consumer finance account on your profile by having a tier four account. The top four banks, Wells, Bank of America, Citi and Chase, those are tier one. There are only those four in tier one. Regional banks are in tier two, credit unions, both national and local credit unions and community banks, are in tier three.
Tier four is the worst and tier one is the best. The closer you get to tier one, the more valuable you are to future lenders, especially business lenders. When you choose a low-value card because of an offer, let’s say Amex or Discover. Did you know that Amex and Discover are lower value cards than Chase or Wells or Bank of America? Since they are lower value, they don’t contribute as much to your profile. Nobody’s told you this. It’s not your fault, but now you know. Another way that you can blow up getting an American Express business card is less valuable to business lenders than if you have a Wells Fargo or Chase business card. The same happens on personal as it does on the business. You want the highest value cards possible to establish a relationship.
Don’t you want an amazing borrower-lender relationship with the top four banks that have the lowest possible rates in the country? The answer is yes. You follow an offer. You did something in numbers, 1, 2 and 3, and number 4, you may have chosen a low-value card because of the miles offer or the points offer. I’m telling you, those points go away and they won’t serve you at some point. You can still have high-value travel cards with the top four. Another way in which we can have the wrong card is by having a low-value instead of a high-value card.
Home Depot Card
Number five. The next way that you can harm your profile is let’s say you got a Home Depot card. Let’s say you are a real estate investor. You got a Home Depot card, but because you didn’t know any better, no harm, no foul, that’s why we’re here together. You got a Home Depot card, but that Home Depot card harms your personal profile because it’s a tier four and FICO counts it against you. It labels it a consumer finance account and it takes points away from your score. Did you know that Home Depot and Lowe’s all have business accounts? We want to put those business accounts over on the business that don’t report to your personal profile. Given all the things we’ve talked about, the mistake we may have made was we got a Home Depot card, a Lowe’s card, a Staples card, a Best Buy card on the personal instead of getting it over on the business. I know individuals who have a $250,000 business Home Depot card.
They won’t go that high on a personal account, but he puts $50,000 to $60,000 a month on his card. That would ruin your personal profile because your balances would go up, your scores go down. Sometimes it carries balances because you’re waiting for a flip to occur. If you got the wrong version of the card, you got the personal instead of the business, Home Depot, Staples, or whatever, then that’s another landmine. That’s another way in which we got the wrong cards because we didn’t know. The other thing and this is important, is that when you’re considering any card, you want to find out if it has a business equivalent. With Home Depot, we think, “I’m at Home Depot. I do this all the time. I’m going to get a Home Depot card,” but we don’t think to ask about the business version. We don’t think to ask about having a fundable entity. That’s another episode. Check out the episodes if you haven’t read it yet. We need a qualified fundable entity to put these different business credit instruments on. We got to choose the business version, and one that doesn’t report to our personal profile.Did you know there's a difference between a credit card and a charge card?#GetFundable . Click To Tweet
Credit Card Versus Charge Card
Our next one is subtle. Did you know there’s a difference between a credit card and a charge card? Think of it this way. A credit card offers you a credit limit. There’s a max you can use and then you pay it down or minimum payments, but then you have a limit. A charge card literally is no limit, charge it up and pay it off at zero. It’s a 21 to 30-day free loan. Here’s the problem. Charge cards are less valuable on your profile on both personal and business. It’s less valuable than a credit card. Since there’s no limit, they can’t calculate how much you’re using of that limit. Your utilization, FICO doesn’t have enough data points to measure it, so it doesn’t count it as valuable. Credit cards are more valuable than charge cards. When it comes time to start looking for a business credit instrument, many of us go straight for it. We don’t even know that it’s a charge card. Some of us don’t even know that there’s a difference. That’s why we’re here together. This is so vital that you want to know, credit card or charge card. We want to use credit cards.
How do we move forward and make the best choices for our fundability and how do we fix the ones that we’ve already got? Let’s take a second with that. First of all, all roads lead to vetting. Every one of the problems that we experienced here in all of these areas, every one of these reasons, every one of these landmines and these choices that we made, that have helped us create a mess, would have been handled 100% by vetting the credit card. What do I mean by vetting a credit card? To vet something is to examine it carefully based on certain criteria. Our criteria is, is it a charge card or a credit card? We want credit cards. Does it report to personal or pure business? Is it high-value and low-value? Those are the ones that we’ve considered.
One of the great business credit instrument offers out there come from American Express. First of all, we don’t want American Express on our personal because of the charge card and credit card thing. It’s like Discover, it’s not as valuable as Chase, Wells, Citi and Bank of America. You get on the phone with American Express. If it doesn’t say credit card in the offer like in the title of the card, because there’s an American Express Blue, but it says Blue card. Guaranteed, that is a charge card because I believe there’s only one. There might be another one. Remember, this change all the time. I’m going from memory, but I’m teaching you how to vet, not how to listen to me. I’m teaching you how to go to today’s and tomorrow’s website and know the questions to ask the customer service reps.
The thing you want to look for is if it doesn’t say credit card, it’s likely a charge card. Let’s say you click on Americans Express Blue and I believe Blue has a credit card. You call up the customer service rep. The first words out of your mouth is, “I’m interested in your American Express Blue credit card,” and then you’re going to ask your six questions or the matrix of six. Three questions. We want to find out what they are. Is this a credit card? Does it have a credit limit or is it a charge card that I have to pay it off to zero? Let them answer the question. What I have found is when it says credit card, then it has a limit and it’s thumbs up.
The next question is, does it report to my personal credit report? Here’s where the problem is. You’re already asking questions that all of my clients and students ask. The customer service reps are not prepared most of the time to answer these questions because most people don’t know how to ask them. This is why you’re on the insider secret loop. When you ask them, you simply want to say, “Does this report to my personal credit report?” You need to follow up that question with, “I know you need to pull a credit report on me, that’s not what I’m talking about.”
Most times they’ll say, “Yes, it goes to your credit report,” because they’re thinking of where the inquiry is being pulled. We want to acknowledge, “I’m not talking about pulling an inquiry. I know you’re going to check my credit.” Use these words, “Each month, does this credit card report to TransUnion, Experian and Equifax on my personal credit profile, paid as agreed on my personal reports?” You need to use language very precisely like that for them to understand what you’re asking. Do not confuse pulling an inquiry from reporting to the bureaus.
The final question is, is this a low value or high-value card? Amex is not Chase, Wells, Bank of America and Citi. It is a lower value card. We know that because that’s what we’re talking about. If you haven’t already looked it up, I’ll be giving you a way to look up more of this information and become a pro in all of this arena. Those are the questions that you’re asking. The high-value, low-value is based on what I’m sharing with you, but what you want to know is, does it report to my personal or does it report to business?
Let’s say you’re calling up Home Depot, “Home Depot, does this report on my personal?” “Yes, it does.” “Do you have a business equivalent? Do you have a business credit card? Is it a credit card or a charge card?” Do you see how the questions go? “We do have a business version of this. It doesn’t report to your personal.” While that’s a low-value card on the personal side, it’s what you need to do your business on the business side. That’s why we want to keep that over here. FICO doesn’t downgrade your business score by having a Home Depot on the business side. It does downgrade your personal score and profile when it’s on the personal side. You keep asking the question.
Here’s the magic. Do this and you will not go wrong if you do. You must ask these questions of each rep whether it’s Wells Fargo, Chase, Home Depot, American Express, whomever. You ask these questions until you get the same set of answers three times. Did I say ask three times? I did not say ask three times. I said ask until you get the same set of answers three times. If somebody says, “Yes, it reports to your personal,” and somebody else says, “No, it doesn’t report to your personal,” you need to keep asking until you get the same answer three times and then that’s what you believe. It is likely to be true.
I’ve been doing this a long time. It’s likely to be true if three customer service reps can agree on the same set of answers. You’re asking, “Does it report to personal or business?” and “Is that a charge card or a credit card?” The high-value or low-value, that’s your education you’re getting here in the show, my boot camp, my book, etc. The high-value, low-value is us because they’re not going to say, “This is a low-value card.” They don’t want you to know that it’s reporting on your personal and is harming your profile. They want to sell credit cards. That’s the name of this game. The way you stop ruining your chances of succeeding with business credit cards is to vet.The way you stop ruining your chances of succeeding with business credit cards is to vet. #GetFundable Click To Tweet
What are those answers? Quiz time. What are the two sets of questions that we ask a customer service rep? Does it report to personal or business? Is it a credit card or a charge card? Once you get that same answer three times, then move forward. The only ones that we want are credit cards and ones that do not report to the personal. You’ll come to soon find out that whether they report to a business credit report or not is not relevant to you developing a good business lending relationship. That’s a different episode.
How do you find out more? First things first. If you want to get a quick review of the principles of fundability, then go to GetFundableBook.com. The book is free. You cover shipping and tell me where to send the book. I will send you a copy. You just cover the shipping and we’re solid. Secondly, if you want to know the strategies of what is necessary to build a fundable personal profile and a fundable business profile, then come to my boot camp. That’s at GetFundableBootcamp.com. That’s sixteen hours of talking about strategies like this and stuff that will save you $10,000 or more in the next couple of years based on knowing the rules of this game.
Go to the website and let’s get you enrolled in the next boot camp. You won’t believe the price. Check it out. You won’t believe how inexpensive it is to get this powerful knowledge. It is my pleasure to always be able to bring to you the subtleties that either nobody knows or don’t care to talk about. The lenders knows, FICO knows, but they’re not talking. Everybody else, this is an insider secret between us. I’m glad you’re a member of my tribe. I’m thrilled that you’ve joined me on this episode.
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