A Guide To Getting A Merchant Account When You Have Bad Credit History

First-time business owners face a lot of issues in their business process. You might think if you have the capital to open a business, the rest will be smooth. But the real fact is something else. There is no better way to deal with business than managing a good credit score. 

In fact, good credit history can be your business advantage to provide better solutions to all business transactions. Opening a business account is crucial for new business owners, and they might face severe issues with the process if they possess a bad credit history. 

The banks will check various aspects of a business owner before considering a business account.

  • Business’s credit.
  • Personal credit.
  • Previous payment behaviors.
  • Business success.

The biggest risk of opening a business account with a bad credit history is that your bank will check your credit score, and if they see a poor score, they will not allow you to easily open a bank account.

So, credit history plays a big role for many new and small business owners. But what will you do if you have a bad credit history that you know already? 

Well, don’t worry! 

We have got you covered this time.

What considers a bad credit history?

A credit score is judged through your repayment behavior in the past, which has a particular score to expose. If you have a personal credit card, you already know the process. 

You do not need to get a new credit card to understand your credit history. However, credit scores are a bit skewed. In this process, there is a chance to get more low scores than high ones. 

Let’s say you have a credit score between 800 and 850. Cheer up! You will get approved for any card (credit and debit), any account (including merchant), anywhere in the world. You can also obtain the toughest loans with such credit scores. 

On the other hand, if you have a 740-799 or 670-739 credit score, you are also good with your credit score to at least freely apply for the merchant account. But a score between 300-500 is considered a poor credit score. All these numbers are measured through FICO credit scoring by Experian. 

This largely determines or exposes your credit history so far. Your repayment behaviors are the main measurement trigger point for counting these scores.

If you have a bad credit score, it will be difficult to get a merchant account from a bank. 

Then what is the solution? 

Well, you can go for bad credit merchant accounts. 

What is a bad credit merchant account?

There are some bad credit merchant accounts available in the market that are considered high-risk accounts, but they provide service to business owners who have acknowledged previous bankruptcy or low credit score.

These accounts are highly risky as they risk considering your company as their payment partner. These are more expensive but can be your best partner in this difficult situation.

Which merchants need a bad credit merchant account?

If you have experienced the joy of applying for a bank loan, you will also be able to feel the heat of getting a merchant account for business. Every merchant provider provides a different notion while considering a bad credit merchant. 

However, certain situations will help you understand if you are in the category of a bad credit merchant.

Low personal credit score

We have already discussed the credit score and how it is judged. These credit scores are vital while applying for a loan or opening a business account. 

Now if you have a poor credit score, putting it simply, banks don’t know you. So, lower credit scores are a point of judgment to place you in the category of a bad credit merchant.

Outstanding Liens

Lien to the property affects your credit history severely. Banks will recognize if you have lien property. Lien property has a negative impact on your credit history. 

When they know that you cannot pay someone and thus they have captured your dedicated property according to the rule, it’s time for the banks to reject your requests. 

Prior Bankruptcy

Bankruptcy is common for many startups in the business world. The business world is competitive, and thus bankruptcy is not unimaginable. But if you have considered bankruptcy before, you are already under the bad credit merchant category.

How To Get A Merchant Account With Bad Credit History?

When you are already on the bad credit history list and finding no hope, keep reading!

There are some prominent solutions to regain your credit score quickly and ramp up with a business account this year.  

Create a good relationship with banks.

When your credit is tarnished, make sure you have one person in the dedicated bank who always deals with you. Try to build a strong relationship with the personal banker and communicate regularly. 

They know the bank more than you and thus can help you get what you need with some simple steps. 

Consider a check verification service.

Go for a consumer reporting agency or check verification service to understand your financial behavior and important acknowledgments. 

Their report can show you what errors are exciting in your financial performance and what areas you can improve from now on. Following them, you will be able to initiate a better solution for getting a merchant account.

Get a tax identification number.

Getting a tax identification number is always a better choice. These numbers are proof that you are paying taxes and you are not an individual anymore but a brand that is responsible to society.

Apart from that, try to form an LLC to get legal approval for merchants. 

Consider bad credit merchant providers.

As we have discussed before, you can simply get a merchant account for high risk despite a bad credit history. They are efficient enough to provide you with a merchant account at a higher risk.

They are solely working on the purpose of providing merchant accounts to businesses that have bad credit histories.