Bad Credit Merchant Account
Posted on Mon, Feb 06, 2012
A bad credit merchant account is used when your personal credit does not fall within the underwriting guidelines set by the financial institution offering the merchant account. Believe it or not, your "personal" credit is one of the most important factors in the approval process; underwriting for a merchant account does not rely on D&B business credit. It is not impossible to obtain a merchant account if you have bad credit, but you may pay more in service fees compared to someone with a stronger credit profile, or the processing bank may need to establish a "reserve" to offset the risk of taking a loss on your account.
You run into problems with bad credit if you are behind on payments to your credit accounts, you have defaulted on loans, your business or yourself has declared bankruptcy, or you have judgments and liens in place against the business or yourself personally. All of these factors can decrease your credit rating. You may not have to go after a bad credit merchant account with one or two bad marks on your credit report, but it depends on the specific bank or financial institution that you're using.
Co-signing and other options exist in order to open a merchant account as a merchant with bad credit . However, this does require asking another person to shoulder the risk, should you have an issue with the merchant account down the road (excessive chargebacks, unpaid fees, etc) .
Another option is to apply for a smaller monthly volume, which represents less overall risk to the merchant account provider, and then over time you can grow the account limits.
High-risk merchant accounts is a category that includes bad credit merchant accounts. You don't need to worry about standing out from other businesses simply due to using a high-risk merchant account, as these types of merchant accounts are prevalent among several specific industries, and your customers will never know the approval conditions between you and the financial institution.
Bad credit merchant accounts may not be your first choice for a merchant account, but if you're trying to recover from financial problems, they can be a lifesaver. The service fees and terms may not be as good as a typical merchant account, but the financial institutions are willing to take a risk on your business that other companies may not touch at all.
Once you have established a history with the processing bank, and solidified your finances, you may be able to apply for an account with better terms elsewhere; however, ask the bank that initially approved you if they can review and improve the merchant account's terms first: since the bank was able to get you approved in the first place, its fair turn to allow them an opportunity to keep your business since they stuck their neck out for you when no one else would.
Talk to the merchant account provider before you apply in order to avoid being denied. Some merchant account providers will not work with high-risk or bad credit merchants, and you don't want to waste your time simply to end up with no merchant account at all; also, each time that you apply for a merchant account, an inquiry is lodged against your personal credit, which reduces your credit score further! The companies may have a specific high-risk department you can speak with to determine your eligibility prior to applying for the account, or better yet, speak with an experienced account manager at Durango-Direct.com today!
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