How to Get a Merchant Account with Bad Credit?

If you have bad credit, it does not mean that you cannot start a business or even open a new line of credit. Anyone can make mistakes when it comes...

If you have bad credit, it does not mean that you cannot start a business or even open a new line of credit. Anyone can make mistakes when it comes to their personal finances, but having bad credit does not mean that you cannot get an account with a business lender. To start your business, you will need financing, so the first step is getting pre-approved for small business financing. To get started, there are a few things you will need in order to apply for a merchant account and begin accepting payments as part of your business operations. Depending on your specific situation, this may seem like an overwhelming process. However, getting the right information and support can make the process much easier to manage. Here we’ll take a look at how to get a merchant account with bad credit as well as some tips and tricks on how to build up your score again if it’s fallen due to unfortunate circumstances.

Find the Right Merchant Service for You

When you are looking for the right business financing company, it’s important to find one that offers merchant services. This is because the company will be able to set up and manage your credit card processing. Merchant services include the setting up of your account, getting your account approved for credit, and setting up the account for your sales. This will enable you to accept credit cards as payment for your products or services as well as get paid quickly. If you are in need of a merchant account, it is important to shop around for the best rates. This will enable you to get the best terms available. It is important to remember that there are many different types of merchant account providers, so make sure you choose the one that is right for your specific business needs.

Business Structure

Merchant account processors may use business credit instead of personal credit if you are a Limited Liability Company or a C-corporation with an employer identification number. The Internal Revenue Service may require an employer identification number for credit card processing if you own a corporation.

Credit and discount rate

A merchant with poor credit can be charged a higher discount rate if they process credit cards. Each time a customer swipes her credit card through your terminal, a percentage is deducted from the purchase price. The lower the discount rate, the more money you keep for every transaction. Those with bad credit might have to pay a higher discount rate. A credit score below 619 is considered poor credit. You should exhaust all merchant processor alternatives before accepting an exceptionally high discount rate as a result of your credit. As your relationship with the merchant develops, the discount rate may be adjusted. You should be concerned about the discount rate as well as other costs. A merchant account processor that offers lower equipment, application, and voice verification costs may be more attractive than one that does not.

Read more: Best merchant account for small business

Your Bank

Banks may offer you a merchant account even if you have a business account with them, provided you have decent credit. You may be able to open a merchant account at the same bank where you keep your checking account, which will lower the fees and startup costs. Your bank may waive your bad credit if you have other positive accounts.

Bankruptcy

If you have just filed for bankruptcy, you may be unable to obtain a merchant account until the bankruptcy has been cleared from your credit report. Bankruptcies may be recorded on your credit report for up to ten years. Even if you are approved for a merchant account, you may receive a lower rate if you have just declared bankruptcy.

Business Industry

Merchant account processors may scrutinize your credit report more than they would for a merchant in a low-risk industry if your business operates in a high-risk industry such as adult entertainment, gambling, or pharmaceuticals. Be prepared to pay higher fees if your business operates in a high-risk industry.

3 Ways to Build Your Credit Score

There are a few steps you can take to build up your credit score if you are trying to get a new merchant account or credit card. The first thing you will want to do is make sure that all of your payments are current. This means paying off any debt you may have as well as any bills you are committed to. It is also important to keep a positive balance on your account. If you have a credit card, make sure that you are only charging what you can pay off in full each month. Another thing you can do is get a co-signer if you are trying to build up your score for a new merchant account. It is important to note that this will hurt your cosigner’s credit score as well.

Tips for Rebuilding Your Credit Rating

If you have fallen on hard times and have ended up with bad credit, it is important to work to rebuild your rating. This will enable you to get a merchant credit card account as well as get a good interest rate on any loans you may take out in the future. Here are a few tips on how to go about doing this. Make sure you are only using 30% of your available credit. This means that you should only charge what you can pay off in full each month. Make sure that you have no outstanding debts. This includes any bills such as utilities or credit cards. Make sure that you are paying your bills on time and in full whenever possible.

Conclusion

Getting a merchant account when you have bad credit may sound like an impossible task. However, it is possible if you know what you’re doing. Start by finding the right merchant service for you, as well as researching and applying for new credit cards. You can also work on rebuilding your credit score by making sure you are only using a small amount of your available credit, paying off all debts, and making on-time payments.