Opening a business account with a bad credit score | moneyfacts.co.uk

nigel woollsey

Nigel Woollsey

Online Writer
Published: 20/12/2019

At a glance

  • You can usually expect higher interest, fees and charges if you or your business apply for credit with a bad credit score.
  • You can improve a credit rating over time and move to a more conventional business bank account.
  • Steer clear of using your personal bank account for business.

Having a less than spotless credit score can have serious effects on your ability to access a number of financial services, including credit cards, loans and hire purchases. In addition, depending upon the severity of your credit rating, you could find that some providers will be unwilling to take you on if you apply for a business account. However, there are providers who will agree to take on your business account, although you may well find that these have fewer or none of the perks of a normal business account, as well as higher fees.

What is a bad credit rating?

Essentially, your credit rating (sometimes also referred to as a credit score or credit history) is a permanent record of how well you (or your business) have handled credit and borrowing in the past. Banks, building societies and other financially interested parties use this to determine how much of a risk you are likely to be if they lend you money or give you the facility to borrow funds on credit.

If you have had trouble with credit or bank accounts in the past then it’s very likely your business’ credit score will be adversely affected . Examples of previous things that missing payments or defaulting on will adversely affect your credit score include:

  • Credit cards
  • Loans
  • Monthly mobile phone contracts
  • Overdrafts
  • Hire purchase agreements
  • Mortgages
  • Business premises utility bills (including electricity, water, gas, broadband, etc.)
  • Local rates
  • Having County Court Judgements (CCJ’s) or other legal rulings for debt against your business
  • Being declared bankrupt, entering into an Individual Voluntary Arrangement (IVA) or being placed on a debt management plan.

Other examples of things which will adversely affect your business credit score

The following are not considered ‘bad’ per se but also mean that the lender has less info to base a decision on, such as:

  • Never having had credit before – no credit history means that lenders and financial institutions have no way to judge how good you are with money and/or credit.
  • Frequently changing address or only being at your current address for a short time.
  • Having many existing credit agreements – while you may well be repaying them all without a problem, it makes banks and lenders nervous that you might be over-extending yourself.
  • Making a lot of credit applications in a short space of time.

Can I get a business account if my business has a bad credit rating?

In short, yes, there are providers who will consider offering a business bank account to businesses with a poor credit rating. However, these tend to be specialist providers – finding a high street bank or building society willing to take you on might be a lot harder.

In addition, you may well find that the charges and fees you must pay will be higher, and the interest charges on loans, credit card debts and overdrafts will likely be higher too.

What can I do to improve my business credit score?

Fixing a bad credit rating isn’t fast or easy. However, it is possible to improve the credit score of your business with time and conscious effort:

  • Find out what your current credit score is. See more about getting a FREE credit check
  • Reduce the number of credit cards, loans or overdrafts you have – especially any that have no balance and you aren’t using them.
  • Pay off as much as you can on your existing credit cards and loans.
  • Build a better credit history with a credit repair credit card.
  • Don’t apply for credit again immediately after being refused.

Pros and cons of opening a business bank account if you have bad credit

  • You can use a basic business account as a ‘fresh-start’ and the start of getting your credit score back on an even keel
  • Interest rates and charges are likely to be higher on business bank accounts for those businesses that have a poor credit history.

Moneyfacts tip

Moneyfacts tip nigel woollsey

It may be tempting to use your existing personal bank account for your business too, however, there are a number of reasons why this might not be a good idea. To find out why, see our guide on The advantages of keeping your personal and business bank accounts separate

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • You can usually expect higher interest, fees and charges if you or your business apply for credit with a bad credit score.
  • You can improve a credit rating over time and move to a more conventional business bank account.
  • Steer clear of using your personal bank account for business.

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