Personal Credit and Merchant Accounts
A line of credit that allows you to accept credit cards is known as a merchant account. Personal credit is of prime importance when you apply for a merchant account. However, it doesn’t have the same effect as it would on a conventional line of credit or a typical loan application.
Why Personal Credit Matters
When a merchant performs a credit card transaction, funds are transferred from the customer’s credit account to the merchant’s bank account as a compliment to the purchase contract. In the case of a chargeback, funds are removed from the merchant’s bank account and transferred to the customer’s account. If there are not sufficient funds available in the merchant’s account, the processor must reimburse the amount personally and collect it from the merchant. That is why personal credit of the merchant is important because. There have been some instances of fraud where the acquiring bank has been holding bills for thousands of dollars. This is why personal credit matters a lot and why banks review a business owner’s personal credit when considering the merchant account’s application.
Possibilities during the Application
During the application, your personal credit standing may affect the process in any of these three ways:
- Poor Credit Standing – If your personal credit is poor, the merchant account application will be declined.
- Marginal Credit Standing – If your personal credit score is marginal, you may be approved for the merchant’s account provided you agree to the stipulations of rolling reserve or ACH delay.
- Good Credit Standing – If the credit score is good, the account will be approved.
The Strength of Credit
Your personal credit does not necessarily have to be perfect to get a merchant account. The strength of the personal credit depends on the type of merchant account you are applying for, the amount of processing volume, and the average ticket amount.
Personal Credit and Rates & Fees
Personal credit rating does not affect the rates and fees applied to the merchant account at all. Merchants of all credit ratings would get an account with the same rates and fees.
However, the overall cost and operation of the account may be affected if a rolling reserve of ACH delay is required.
Bad Credit & Existing Merchant Account
It is believed that the bad personal credit rating may result in the revocation of the existing merchant account. However, it is not true at all. Once you get a merchant account and start accepting credit cards, processors use your processing history as a benchmark, not your personal credit status.
How to Get Merchant Account with Poor Credit
If you are having a poor credit rating and want to get a merchant account, these are the things you can do to get a merchant account:
Register a Co-signer
Try to have someone onboard with better credit rating as a co-signer. In this case, the credit rating of co-signer is considered.
ACH Delays or Rolling Reserves
Another way to get a merchant account is by allowing the processors to impose ACH delays or rolling services on your account.
Please note that processors have varying requirements. Some may approve your account with marginal credit rating while others may ask for a perfect credit rating. Improving your credit rating is the key in every case!
Contact Us: To discuss your best strategy to get your merchant account approved with a less-than-perfect credit score.
High Risk Merchant Account LLC
915 Folly Road, Suite 49
Charleston, SC 29412