One common reason merchant accounts get declined is bad credit. Merchant services providers use personal credit ratings to determine if they’ll open an account with someone even though business finances are typically separate from personal finances. Despite those circumstances, however, bad credit doesn’t make opening a new account impossible. Take a look at these four options that will improve your chance of success.
Use a Cosigner to Get Started
If you have a bad credit score, you can rely on the good credit score of someone else by getting a cosigner. If you have a friend, family member, or business associate with good credit, you may be able to get approved with a cosigner on your merchant account. The downside is that if your account runs into trouble, the cosigner will be held financially responsible. For this reason, you should only rely on cosigners in special circumstances.
Research High-Risk Merchant Service Providers
Low-risk merchant service providers that offer the best discount rates on merchant accounts can be very strict about credit scores. However, there are several high-risk options that can help you acquire a bad credit merchant account. You may have to pay higher credit card processing rates initially, but you can get those rates down over time as you prove the stability of your business and improve your personal credit score. Many high-risk merchant service providers are experienced in working with people who have bad credit, and they’re still willing to take the risk.
Plead Your Case With the Merchant Service Provider
Even though merchant service providers are hesitant to approve accounts for people who have bad credit, that doesn’t mean every provider will deny your application over this one aspect. This is especially true if your credit score is in the 600s. Try to explain why your credit is bad. Be sure to take accountability, showing that you’re working on resolving the issue and that you won’t let it happen again. There are plenty of good reasons why your credit score may be under the typical 700 threshold for approval, such as a divorce, a major illness, or another unfortunate situation.
Highlight Your Business History and Stability
Your personal credit history is not the only thing that merchant service providers look at when deciding whether you can open an account. Providers also focus on your business history and stability. Matters can become more complicated if you have a high-risk business model. As long as you can show bank account statements, demonstrate low business risk, and produce documents that prove your stability, it’s possible to get approved for a merchant account. The more information you can provide, the better.
Bad credit doesn’t mean that you won’t be able to open a merchant account. You’ll just have to work harder at proving that your business can handle the financial responsibility associated with processing credit cards and that your credit report will improve. Use the tips in this article to help you find the best merchant service provider for you.