A merchant account is a line of credit extended to your business. As such the underwriting criteria for approving a new merchant account includes the credit score of all applicants presented on the application. A bad credit score does not, automatically, mean the account will not be approved. Other criteria are also considered and include; the business’s industry, the method in which credit card transactions are processed (swiped vs. keyed in), the business’s financial strength and business history.
A retail business (traditional brick and mortar) will have an easier time securing a merchant account with bad credit then an internet business or home based business. Additionally, certain industries are considered high risk and it will be more difficult to secure an account with bad credit if your business is categorized in a high risk category.
Another consideration for securing a merchant account with bad credit is to identify a merchant account processor that specializes in account approvals for low credit merchants. Another option is the addition of a co-signer on the account. The co-signer assumes some of the risk on the account and does not need to be a principal in the business.