How To Apply For A Business Credit Card With An EIN

An EIN is a nine-digit tax ID number issued by the Internal Revenue Service (IRS) that identifies a business entity. All types of businesses, from sole proprietors to corporations, can obtain an EIN free of charge. Businesses located in the U.S. or U.S. territories may apply for an EIN online, by fax or by mail. A Social Security number (SSN) or another tax identifier is required to apply for an EIN online. Internationally located businesses must contact the IRS directly, by phone, fax or mail.

Benefits of Using an EIN When Applying for Business Credit Cards

A major benefit of using an EIN when applying for a business credit card is establishing a credit history for the business. Business card issuers, using the EIN, report activity to commercial credit bureaus that keep a record of the business’ credit profile. As a business grows and its need for funds increases, a healthy credit history is invaluable for securing funds for capital expansion or working capital. According to the U.S. Small Business Administration, 46% of small businesses use personal credit cards for business expenses, thereby missing out on the opportunity to build a business credit history. Although, you can generate business credit history with a business credit card, even if you use your Social Security number, there may be additional risks involved.

Another benefit of applying for a business card with an EIN is the separation of business and personal finances. A dedicated business credit card provides improved tracking of expenses and provides more accurate record-keeping for accounting and tax reporting purposes. Overall, isolating business from personal financial activities gives the owner better information on business performance and aids in decision-making.

Ideally, a business owner would prefer to use only an EIN for credit card applications. EIN-only applications can limit liability to the business alone and eliminates personal liability for any unpaid business credit card debt.

Using only an EIN also prevents the applicant’s personal credit history from affecting the business’ eligibility for credit. When an issuer requests an SSN on a business card application, it means that the applicant’s personal credit report will be pulled and their credit history will be used in the issuer’s assessment of the business’ creditworthiness. Any negative marks on the applicant’s personal credit history, such as late payments, charge-offs or bankruptcies, affect the business’ ability to secure credit. So for an owner with a poor personal credit history, there is a clear advantage to applying for business credit with only an EIN.

However, the reality is that submission of the owner’s SSN, in addition to the company’s EIN, is necessary when applying for a business credit card in the vast majority of cases. Federal law, under the Customer Identification Program, requires that financial institutions verify the identity of a customer. Business credit card issuers will use the SSN of an owner for the verification process since a small business may have little credit history to make this verification on business data alone.

Another consideration is that small businesses with limited assets and minimal credit history represent more financial risk to lenders. Credit card issuers reduce their financial exposure by requiring the business owner to provide a personal guarantee for business debts. In reviewing an application for a business credit card, the card issuer may consider the personal credit history of the owner to assess whether they could cover unpaid business debt, should the business default.

This underlines the importance of maintaining a healthy personal credit report when running a business. According to a 2020 Federal Reserve Bank study, 88% of small businesses relied on the personal credit score of an owner to obtain financing.

Corporate credit cards are consistently the only types of credit cards that allow applicants to use an EIN without the additional submission of an SSN. However, they are generally only available to established corporations with significant assets, history and revenue which mitigates the financial risk for credit card issuers.

Since corporate credit cards are typically the only types of cards applicants can secure by solely providing their EIN, the options are slim. Corporate cards are also not built for small businesses. Typically, businesses may only qualify for these cards if they can show a specific amount of assets or revenue. If you do qualify for a corporate card, here are some options you can apply for without having to include your SSN alongside your EIN:

• Brex Card*: Brex issues corporate credit cards to qualifying businesses based on revenue, number of employees, investment thresholds or startups on the path to meeting these metrics. If your business meets Brex’s criteria, you can submit an application as long as you have a U.S. EIN issued by the IRS, a valid U.S. incorporation and a physical address.
• Ramp Business Card: In order to qualify for a Ramp Business Card, you must have $75,000 in a U.S. bank account that you link to your application. If your business meets this criteria, and is a corporation, LLC or LP, you can submit an application with only your EIN.

Small business owners can keep their business and personal credit reports separate by applying for business credit cards that don’t report to consumer credit bureaus. Issuers will likely still require the owner’s SSN during the application process, in order to determine creditworthiness. This will trigger a hard credit inquiry on the applicant’s personal credit report.

However, beyond the initial hard pull, subsequent activity on the business credit card account will usually only be reported to commercial credit bureaus. There are some business card issuers that routinely report to consumer credit bureaus, so it’s best to contact the card issuer to verify what their reporting policy is.

One reporting exception is in the event of negative activity in the business account, for example, non-payment. In that case, the card issuer may report the derogatory item to the consumer credit bureau, affecting the owner’s personal credit score.

After replying for and receiving an EIN for your business, there a few key steps to follow in order to build business credit:

1. Apply for a D-U-N-S number. Just as a SSN is used to track your credit history with consumer credit bureaus like Experian, Equifax and TransUnion, a Data Universal Numbering System (D-U-N-S) number is used to track your business credit with business credit bureaus. After receiving your EIN, you can register your business with Dun & Bradstreet—one of the major business credit bureaus—to receive your D-U-N-S number.
2. Improve your personal credit score and apply for a business credit card. If your personal credit score is in a strong place, you can use your SSN and EIN to apply for a business credit card. After using a business credit card responsibly, this history will be reported to the business credit bureaus and can help you build business credit over time.
3. Make business credit card payments on time and in full. After receiving a business credit card, manage the card responsibly. Pay your balance on time and, whenever possible, in full each statement period.
4. Monitor your business and personal credit reports. Mistakes happen, but mistakes on your credit report can result in substantial negative changes of your credit score. It is a best practice to request a copy of both your personal and business credit reports from the credit bureaus, at least once a year, to ensure no mistakes are being reported.

Using an EIN during the business credit card application process has some significant benefits for the small business owner. It can help establish a credit profile for the business, which is important for future financing requirements. It also facilitates separating personal and business financial data, which results in more accurate record-keeping and tax reporting.