Business credit, utilization, and adverse action

Several discussions have sprung up recently about how business credit is reported and analyzed by the issuers. However, there don't seem to be too many data points in the forum about business utilization and correlations with adverse action. DaveHanson and others have outlined arguments for keeping indiviual (and especially overall) personal utilization at <50% to avoid adverse action, but does this rule of thumb also apply to business lines which do not report to the personal CRAs?

There a few nuggets here, but I think a specific thread devoted to this topic is warranted.

So, I suggest starting a poll to gather the collective experience of FWFers.

I'll start...

Type of business: S-corp
Number of biz lines: 11
Number of biz lines with balances: 6
Total biz balances: $131K
Utilization across biz lines: 73%
Other relevant information: ?
Adverse actions? None so far, but most of these lines are brand new.

EDIT: Added "Type of business" to see if it matters.

I also have limited history, but feel comfortable maxing out business cards. There's no credit report, so all they have to go on is whatever cards I have with them and my personal report. As long as my personal report is in shape, I have little fear of adverse action. I'd be interested in hearing from those with more experience.

JohnGalt69 said: I also have limited history, but feel comfortable maxing out business cards. There's no credit report, so all they have to go on is whatever cards I have with them and my personal report. As long as my personal report is in shape, I have little fear of adverse action. I'd be interested in hearing from those with more experience.

You may be correct for sole proprietors without a tax id. However, there are business CRAs (e.g., Experian Business) which the credit issuers may be consulting when reviewing business lines. Is there a distinction between EIN (e.g., corporations) and SSN-based businesses for this topic? I'll add that to the format of the poll.

JohnGalt69 said: There's no credit report, so all they have to go on is whatever cards I have with them and my personal report.
Aside from Experian, as lhendricks mentioned, Equifax also provides business credit reports. There might also be a D&B file on you although it seems more for net30 type accounts. Your D&B file would become more important if you wanted to obtain credit without a personal guarantee.

I've never had any adverse business credit actions but I think business credit is a lot less sensitive to utilization. When an individual owes 50k it's expected that they've spent the money somewhere and must now pay it back out of their regular salary; when a business charges 50k it's presumably in pursuit of profitable activities rather than simply "spent". I only have a few business credit cards and I've taken some up to 90% with no noticeable effect.

When opening accounts with wholesalers or suppliers the inquiries never show up on my personal report so I presume they're checking a business report. I've never checked my own reports (or received a rejection referencing one) so I don't actually know what's recorded.

I'm replying at OPs request, but wish I had more helpful advice to offer...

I've found business credit to be much murkier than personal credit. Here's what I do know:

-Business cards almost never report utilization to your personal credit (as well they shouldn't).

-I routinely max out business cards, and don't worry about 90%, 50%, or other breakpoints. Like others here, I've seen no adverse actions as a result.

-Business cards vary significantly WRT where they inquire and how they report. Capital One and WaMu business, for example, really treat them like personal cards with a business attached (i.e. they pull personal, not business credit; they grant CLs based on same, and they don't report to the business CRAs). Other issuers, like Citibank, do indeed inquire and report to business credit agencies (generally D&B or Experian business). Rarely do front line CSRs know exactly what their policies are, or course (sigh).

-Certain issuers treat business and personal lines very differently, while others see them as more or less coming from the same "bucket" of overall credit lines. Sometimes you can even reallocate from business to personal if you have the right CSR help you, but that's YMMV also.

Hope that helps some.

I'd like to know much more than I do about the fine points of business credit and underwriting at the various banks.

Dear DaveHanson,

what utilization percentage do you use for business cards?

agentpt5 said: Dear DaveHanson,

what utilization percentage do you use for business cards?

2 posts up:

"-I routinely max out business cards, and don't worry about 90%, 50%, or other breakpoints. Like others here, I've seen no adverse actions as a result."

I still think the whole "keep it below 50% utilization" thing is kind of pointless regardless of business or personal lines. I've maxed out both and never had an adverse action. My pattern is to do app-o-rama, collect max signup bonuses, max out 0%, wait a year, pay it all off, wait a couple weeks for credit score to skyrocket, repeat. I don't check my score as often as some here, but I DID check it about a month ago, this was with maxed out 0% lines but after doing monthly payments on them for about 10 months, and my scores (wife & myself) were not too bad, both of them were still over 700 despite the hit from high utilization (more than 100k in loans). I just recently paid them all off and reloaded. I was actually expecting more trouble reloading, thinking the companies would finally be clamping down like Chase has done, but I had no problems getting another 130k or so in 0% money. If BOA clamps down in the future this game is over in my opinion. At least for me they were the key to maxing out the 0% deals from all the other banks. And if Chase were still in the game I'd have >$200k in 0% money this time around.

I am also Sole Prop. I have about 50k in business credit that I have utilized about 97% (only for a month now though, with no business history) with no adverse action. Also, I have all my personal lines (another 60k) at 89% utilization (actually a couple are at 90-91% after the BT fees, but they will be at 89% after the first minimum pmt). I did ask the business companies if they had problems with people utilizing over 90% of thier credit and was reapeadly told that "No, as long as your are under your credit limit and making your pmts, you are fine."

Good post OP. I am interested to hear what others say so I can decide to keep these business lines out there so high or not.

BobbyRobert said: is anyone willing to share data on business income/revenue and CL? I just got a chase business card with a 15k cl and I reported my business income accurately as 20k -- the business is a rental property, a sole prop.

How strong is the relationship between reported income/revenue and CL with business cards?

Basically there is no relationship. They look to personal income, since you're giving a PG.

Lets try to keep this thread on track. For general business card questions, go to the Mega Business Cards thread.

lhendricks92 said:
A quick example: Chase is very much in the game for me.


So what card was personally targeted/marketed to you in the past month or so since Chase changed their practices that was not available to the general public and had a capped BT fee? I'm not saying this is impossible - but I'd bet if you already did the 0% thing with Chase in the past for a decent $ amount, even if you kept it below 50% utilization, I doubt you would be targeted for a special 0% deal in the future from them. If you have evidence that suggests otherwise I'd love to see it. But even then, you would still be a year behind the guy that maxed out (near 100% utilization) their line in the previous year because you have to go 2 years to get the same profit at 50% utilization.

Also - I have read the adverse action thread. Even though its never happened to me, I don't think it would even matter if there was an adverse action. I've got about 100 credit cards, I could care less if some company closes one or two of them that I no longer use. I don't think they will close an account with a balance on it that you are paying properly, so your 0% money is fine and your regular "every day use" card is fine too. I don't know what the big deal is??? So what if your score goes down a little, if you are maxing out your 0% lines you expect that anyway, its going to skyrocket once you pay off the loans. And by the way, there are people in that thread complaining about adverse actions DESPITE less than 50% utilization.

If someone can convince me that keeping utilization below 50% is going to bring me more profits, I would go ahead and pay down to 50% today, but somehow I doubt that is going to happen.

crazyapps said: if i did a mini-AOR for a few new business lines (i have one at about 90% utilization) would they accept/deny me based on my personal credit?
Yes, they base thier decision after a pull on your personal credit report for business cards, even though they are not listed on there when you get them.

I have never seen or heard of any adverse on business cards. I had business cards for many years. However I see more line increases automatically and otherwise on personal cards. No matter how established my business is, paying on time etc. I seem to think that If I opened another company or two, that I could get business cards on those new companies with ease and within a short period of time, a year or so have big credit with those cards. They look at personal stuff for almost every one of these cards. In the underwriting process I think personal credit is the top factor on most of the cards.

Rob

MarketVViz said:
To answer your questions - I mentioned chase only because they recently put an end to new cards with capped fee 0% offers lasting >3 months (that may change of course at any time). You implied that this was something targeted at me because of high utilization, which is not true.

There are plenty of new Chase cards with capped fee BT offers. Links are all over this forum, including in my own recent AOR thread. If Chase is denying YOU capped BTs, then doesn't that suggest something specific to your situation? Whether it has anything to do with your utilization, I have no idea. I'm still trying to understand your comments about Chase.

MarketVViz said: Regarding adverse actions - again, if you go to that thread you will see people complaining about adverse actions despite <50% utilization.

Are you saying that personal utilization is irrelevant for adverse action? Again, that seems highly unlikely based on the data in this forum.

What credential would I need to apply for a business card?

Can it be as simple as listing my first and last name as the company name?

If so, and the company is a sole proprietorship, would I need to obtain a business license?

Even if my business is to simply buy and sell stuff on eBay?

Three weeks ago, I did an AOR. Today, D&B left me a voice mail message, requesting that I call it back because several companies inquired my company's D&B report.


Anyone know what is this all about?

If a payment is missed on a business account, does it have adverse affects, like how a personal account would? I know for a personal account, the company is waiting for you to miss a payment on any of your accounts so they can cancel the 0% and start charging interest. Is this the same case for business accounts?

Type of business: Sole proprietorship
Number of biz lines: 10
Number of biz lines with balances: 5
Total biz balances: $75K
Utilization across biz lines: 84%
Other relevant information: Currently being investigated by USAA.
Adverse actions?

I may have the first adverse action on a business account. Chase has requested for the BT funds to be returned ($35,500 total - $25k business, $10.5k personal) from my bank, USAA. It should be noted that my accounts are currently frozen by USAA and are in the process of being unfrozen (hopefully this will happen some time soon). USAA has not yet complied with the request and I have contacted the individual at Chase that requested the BT reversal.
The personal account is at 75% utilization and the business account is at 98% utilization. I have made the minimum payments on both accounts for two months.

abracadabra11 said: Type of business: Sole proprietorship
Number of biz lines: 10
Number of biz lines with balances: 5
Total biz balances: $75K
Utilization across biz lines: 84%
Other relevant information: Currently being investigated by USAA.
Adverse actions?

I may have the first adverse action on a business account. Chase has requested for the BT funds to be returned ($35,500 total - $25k business, $10.5k personal) from my bank, USAA. It should be noted that my accounts are currently frozen by USAA and are in the process of being unfrozen (hopefully this will happen some time soon). USAA has not yet complied with the request and I have contacted the individual at Chase that requested the BT reversal.
The personal account is at 75% utilization and the business account is at 98% utilization. I have made the minimum payments on both accounts for two months.

I am sorry to read about your ordeals in the "BT goes wrong" thread. USAA still hasn't thawed your account? Your last post in that thread indicates that your accounts are gradually seeing the light. Good luck!