Your credit score shows your financial health. Based on your credit score, financial institutions measure your trustworthiness and decide whether to approve you for, e.g., a loan or not. Interested in merchant account bad credit? Read this article to know more about bad credit scores and what you can do if you have one.
What Is Bad Credit?
Bad credit indicates you’ve had a past failure to keep up with your credit agreements. Also, it shows you’ve been unable to get approved for new credit. It illustrates you’ve failed to pay your past credit obligations on time.
Many creditors use the popular FICO, which was created by the Fair Isaac Corporation. This scoring system combines financial data collected from major credit bureaus Equifax, Experian, and TransUnion. These are also called credit reporting agencies.
Each scoring system ranges from 300 (the lowest possible score) to 850 (the highest possible score):
- Excellent: 750 – 850
- Good: 700 – 749
- Fair: 650 – 700
- Bad: 300 – 649
When you have a bad credit score, lenders are less likely to approve you for business funding. The reason is that you may fall behind on any credit card or loan you’re given. However, there’re payment experts that specialize in the high risk industry and are ready to work with bad credit merchants.
Merchant account bad credit can’t be a challenge if you work with a reputable payment processor that can provide you with the right merchant services tailored to your specific business needs.
What to Do if You Have Bad Credit?
How can you build credit from scratch if you have bad credit? Here’s what you can do. First of all, you can open a credit card. This way, you can establish an official line of credit and start building a good credit history. This will be reported to the three credit bureaus.
Also, you can get a junior credit card, which is meant to teach young adults and children good credit habits. This can be done by using a card connected to an adult’s account.
To improve your score, you should make timely payments. Aim at paying as much of the monthly balance as you can, on time. Do you know the so-called “snowball method?” This is when you pay off the smallest of your debts first, and then start paying off the next largest. This is a popular option.
Another way is to focus on reducing your credit utilization rate. This is the ratio of how much you’ve spent on your credit card versus the card’s limit.
Finally, be aware that your score considers how many of your cards have balances. During this rebuilding period, don’t take on too many credit cards. You’ll have a difficult time managing your balances and payments. One or two credit cards is enough to get you started.
Author Bio: Electronic payments expert Blair Thomas co-founded eMerchantBroker, serving both traditional and high-risk merchants. His passions include producing music and traveling to far off exotic places. eMerchantBroker is America’s No. 1 merchant account bad credit company, serving both traditional and high-risk merchants.
