How to Get a High-Risk Merchant Account with Bad Credit?  

Bad credit merchant account

When getting a high risk merchant account bad credit history or a poor credit score can make it difficult to find a provider who is willing to work with you. 

Additionally, the negative effects of bad credit can remain on your credit report for a decade. However, don’t lose hope because there are providers out there who may be willing to give you a high risk merchant account despite your situation. 

Just keep in mind that they might charge you a higher discount rate compared to what you would normally be charged.

Here are some frequently asked questions regarding bad credit merchant accounts, along with information on how to obtain one and important factors to keep in mind.

What is a bad credit merchant account?

When a business has bad credit history, merchants can accept credit card payments through a merchant account. 

The funds from transactions are held securely until the settlement period and then transferred to the business bank account. Without a merchant account, accepting card payments is impossible. 

When applying for a merchant account, the processor evaluates various factors, including credit score, bank statements, and processing history, to determine eligibility. 

Businesses with negative credit history or delayed payments face reduced chances of approval. Young businesses and those in high-risk industries face additional challenges. Traditional banks avoid businesses with poor credit, so a high-risk processor is necessary. 

These processors understand the difficulties faced by such businesses and help establish electronic payment systems for customers to pay with credit cards.


What makes a merchant account high-risk?

Most payment services providers cater to a wide range of industries, but there are specific businesses that they approach with caution. 

If you’re in a high risk sector such as casino or sports betting, adult entertainment, or drugs/pharma, expect your credit reports to be scrutinized more closely compared to a low-risk business

These businesses typically operate in high-risk industries that have a higher chance of experiencing fraud or chargebacks. To accept debit and credit card payments, businesses classified as “high-risk” require a high-risk merchant account. 

If your business falls into the “high-risk” category, consider finding a suitable payment processor that provides payment solutions specifically designed for businesses in high risk industries. 


Why having bad credit is considered high-risk?

Companies with poor or no credit history are seen as high-risk investments by lenders. Both personal credit scores and business credit history are taken into account in this evaluation. 

Traditional lenders are unlikely to invest in businesses with a poor track record of repaying credit, while high-risk commercial lenders may provide funding but impose strict repayment terms and potentially require collateral. 

Payment processors also avoid partnering with high-risk parties, such as those with poor credit history, due to the potential for financial losses. 

Businesses lacking a strong credit history can benefit from working with merchant services providers specializing in serving high-risk businesses, who understand the strict underwriting processes involved and may require additional financial information or forms of assurance.


Is it possible to get a merchant account without a credit check?

If you’re concerned about your credit score affecting your business’s ability to accept credit cards, there are alternatives to getting approved for a merchant account without a credit check. 

The approval process for a merchant account depends on whether you’re applying for a full-service merchant account or a simpler account with a payment service provider like Square or PayPal. 

Payment service providers like Square, PayPal, and Stripe offer a quick and easy way for businesses to accept credit and debit card payments without a full-service merchant account. The application and approval process for no credit check merchant accounts are faster, and there is no credit check. 

However, payment service providers may shut down accounts if they detect unusual activity or if the business operates in a high-risk industry or experiences a lot of chargebacks. 

Getting a full-service merchant account requires more paperwork and time, but once established, it is stable and less likely to experience sudden account freezes or account terminations.


What is the credit score requirement for a merchant account?

The answer to this question can vary depending on the provider you choose, but generally speaking, a good credit score is important. 

Most merchant services providers have a minimum credit score requirement, typically around 580. If your score falls below that, you may either be rejected or have to apply for a high-risk merchant account.

If your credit score is higher than 600 or 630, you will likely be approved for a merchant account. The required credit score may differ depending on the underwriting process of the merchant account provider, as there is no universally accepted number in the industry.


How do I get a merchant account with bad credit?

To increase your chances of finding a suitable merchant processor, look for providers that specialize in high-risk business accounts. However, keep in mind that these providers are not one-size-fits-all. Their credit standards, transaction fees, and processing rates can vary from one provider to another. Additionally, it’s common for high-risk accounts to not have access to next-day funding.

If your credit is not so great, you’ll need to find a provider who is willing to work with merchants with low credit scores. This typically means you’ll need a high-risk merchant account, which tends to be pricier than a regular, low-risk account. 

When it comes to obtaining a merchant account with bad credit, the process is quite similar to that of merchants with good credit. However, it’s important to note that your options will be more limited in terms of providers who are willing to work with you. 

To obtain a merchant account with less-than-perfect credit, there are a few steps you need to take. The overall process is quite similar to applying for a merchant account with good credit. Here’s what you need to do:

  1. Decide on the structure of your new business
  2. Apply for the necessary business licenses for your business
  3. Open a traditional business bank account
  4. Select the different payment methods you want to accept
  5. Create and promote your terms of service and refund policies
  6. Ensure you comply with all PCI regulations.
  7. Gather documents that prove your business’s age, size, and processing volume
  8. Apply online for a merchant account
  9. Be prepared for the underwriting process by gathering bank statements and processing statements for he past six months
  10. Before finalizing a provider, carefully review the processing fees to ensure they are affordable for your business

For merchant accounts with bad credit, the underwriting process may require additional financial information, such as a personal statement of affairs (PSOA) that lists your business’s assets and liabilities. 


How fast can you get a bad credit merchant account?

Properly securing a merchant account requires accurate underwriting, which involves processing bank statements, business documents, processing history, and other relevant documentation. This process typically takes a few days to approve the application. 

When applying for a bad credit merchant account, you’ll need to provide extra documentation compared to a traditional merchant account application. 

Payment processors will likely request bank statements from the past 3-6 months to show your business’s financial standing and ability to generate revenue consistently. The underwriting process for approving a bad credit merchant account application is more complex and may take up to two weeks to finalize. 

Some traditional merchant account providers offer “instant approval” as a feature to compete with payment service providers. However, choosing providers that offer instant approval can come with a risk. 

If any transaction is flagged as suspicious, there is a higher chance of your account being terminated abruptly or your funds frozen. 

Being terminated by your provider may also result in being added to the Terminated Merchant File (TMF, or MATCH List). If you are on the MATCH List and having a poor credit score can make it extremely difficult to get approved for an account with another provider.


Why choose PayFasto to get a merchant account?

PayFasto offers a versatile payment solution for high risk businesses of all types. Our payment solution is perfect for any merchant looking to process cashless payments with ease. 

Whether you’re a small local store, an online business, or a large retail chain, PayFasto can help you meet your cashless payment needs. We provide a range of payment options, secure payment processing, real-time transaction monitoring, and 24/7 support to ensure a seamless payment experience. 

Our high risk merchant account is tailored to your specific needs, helping you manage your cash flow, reduce processing fees, and increase transaction speed. Additionally, we’re building a simplified yet feature-rich CMS that will allow you to easily manage all your payments from a single platform.

High risk merchant account bad credit - PayFasto

Have a bad credit score but need a high-risk merchant account?

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