Opening a business bank account if you have a bad credit score
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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.
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:
The following are not considered ‘bad’ per se but also mean that the lender has less info to base a decision on, such as:
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.
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:
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.