Once you have a merchant account, your processing history will determine your standing with the credit processing company. But what about when you try to obtain a merchant account? How important is your current credit rating then?
Essentially, a merchant account is a line of credit, so an individual’s personal credit rating and history will be factors contemplated during the application process. If the applicant has a very low credit rating they likely will not be given a merchant account, but if the applicant has a marginal credit standing the credit company may allow an account to be approved with certain stipulations in place such as an ACH delay or a rolling reserve. Of course if an individual has a good credit rating and all other elements are in place they are very likely to be given a merchant account.
For the applicant with the marginal credit score the best advice is that they should do their research carefully and be upfront about their credit standing when applying for a merchant account. There is nothing to be gained by less than full disclosure, and an individual will be better served by learning about the credit processors who have a larger tolerance for credit risk. Some processors may require stipulations such as a rolling reserve or an ACH delay, which will at least give access to a merchant account although it will impact the operating costs of the merchant account. Another option for an applicant with poor credit is to have a person with good credit act as a co-signor on the merchant account application.
It’s important to note that while personal credit risk is taken into consideration during the application process, it does not impact the rates and fees associated with the merchant account if it is in fact approved, and if your personal credit risk increases after you open a merchant account you won’t have your merchant account withdrawn. Once the merchant account is in action it will be judged on the processing transactions that take place.