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What Credit Score Is Needed For A Merchant Account

What Credit Score Is Needed For A Merchant Account?

If you’ve just started a business, you may only now be wrapping your head around all the things you need to sort out to get things off the ground, but if you want to be able to compete on the field of business then you’re going to be looking to take payment for your services electronically.

Almost everyone carries a credit or debit card nowadays, and fewer people carry around cash than ever.

Keep on reading to find out what credit score is needed for a merchant account. 

What Is A Merchant Account?

A merchant account is a business bank account that allows a company to process electronic payments, such as credit card transactions etc.

This account is a partnership with a merchant bank, which facilitates payments from an intermediary such as a payment processor and is thus essential for online business or payments from electronic services.

What Is A Credit Score?

A credit score is a points system (score) that lets companies know just how trustworthy you are when you ask to take on the responsibility of a loaned payment (credit).

The score is assigned as a number between 300 and 850; the higher the number, the better your credit score. 

Your credit history is the factor which determines your credit score; this is based upon how much debt you currently have, your history of loan repayments, your number of bank accounts etc. 

Lenders will look to your credit score to analyze the likelihood of you paying back your loan on time.

In our modern world, having a good credit score is very important. Having a poor credit score means that you may struggle to have your credit applications accepted by lenders- you would be considered what is known as a ‘subprime borrower’.

Lenders often charge higher interest on subprime borrowers due to what they consider to be a higher risk in lending; and they may also require a quicker repayment period on loans.

Conversely, a high credit score is considered good and means a lower interest rate: less money paid in interest. Credit is usually scored using the FICO system.

Is A Good Credit Score Needed To Obtain A Merchant Account?

Is A Good Credit Score Needed To Obtain A Merchant Account

Not only will your company be credit scored when it is evaluated for a merchant account, but the credit of its Directors and Financial Associates will also be evaluated.

A credit score evaluation for a merchant account can be very extensive- six years of credit history will be considered.

There are companies which will offer merchant accounts which require no credit checks – although these are more limited: they have maximum daily values and the repayment rates are far higher.

It is recommended that you have a credit score of at least 700 when pursuing an evaluation for a merchant account.

Other benefits of maintaining a good credit score include qualifying for the top business credit cards- which would obviously be a massive boon for your fledgling business venture.

What Is A Bad Credit Merchant Account?

A bad credit merchant account is issued to business directors with low credit scores or a bankruptcy in their credit history.

Similarly to subprime borrowers, they are considered high-risk, and therefore these accounts are significantly more expensive for you, the merchant.

Banks will obviously not want to give you credit if they think that you won’t be able to pay them back their money; hence why there is such an emphasis on the credit check.

Definitions of ‘bad credit merchants’ vary between merchant account providers, but you can be certain that the label will apply to yourself if any of the following rings true:

Low Credit Score

If you score 580 or less on the FICO system, you would be considered a bad credit merchant.

This could also apply to you if you’re simply a first-time business owner: banks like seeing an established business history when they evaluate you for an account, and your lack of experience will count against you at first.

History of Bankruptcy 

If a prior business ended in a bankruptcy, or you’ve filed personally for a bankruptcy, then you will certainly have bad credit.

Bankruptcies stay on the credit report for seven to ten years, which is a long time to wait until you can be considered low-risk again.

Outstanding Liens 

Depending on how your bank chooses to evaluate it, a lien placed on your property can negatively affect your credit score. An IRS-filed lien against your property for unpaid taxes would be very bad for your score.

A lien filed as collateral for a loan in which you were still keeping regular payments would probably be more fairly looked upon by your bank, and not affect your score.

Outstanding Judgments 

An outstanding judgment from a civil or criminal court would be a black mark against your credit until that judgment has been paid by yourself.

Can You Get A Merchant Account Without A Credit Check?

Popular ‘instant’ approval processes applied by payment service providers have inspired merchant account providers to also offer “instant merchant accounts”, which means receiving merchant accounts from providers without a credit check is certainly possible, and quickly too –

It may be possible to get an approval from certain providers within just 1-2 days. Bear in mind that applications for these accounts are scrutinized far harder than usual.


Now, losing business while waiting for an account approval can be a frustrating experience for merchants; these providers take some basic business details, usually from an online form, and then simply approve your application. 

While this may appear tempting if you know that your credit history is less than stellar, you would then face a much greater risk of the sudden termination of your account the instant the provider decides that anything is suspicious.

You’ll be under an almost impossible amount of scrutiny due to the nature of the account obtained.

If that wasn’t bad enough, should your jumpy provider decide to pull the plug on your merchant account then they may also place you on the Terminated Merchant File (TMF, or MATCH List) upon closing your account.

Being present on the MATCH List, as well as your bad credit score, will utterly destroy your reputability. You will find it impossible to apply for another merchant account in the future.

We hope that the information in this guide has been helpful, thank you for reading!

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