If you’re in the process of starting a new small business and are hoping to open a business checking account, you need to ensure that your own personal finances are in order. If you are one of the millions of people around the US with a poor credit report, you may need to try and improve things.
Opening a business checking account is pretty much the same as opening a personal one and a bad relationship with one bank or just a poor credit report can, unfortunately, translate to a poor business credit report.
There are 3 credit bureaus that determine your personal credit score: Equifax, Experian, and TransUnion. They determine your credit score through 3 different credit score systems including FICO®. If your personal score is lower than the average, your bank will be aware of this and it can affect you when opening a business checking account.
But what can you do if this is the case? There are a few options for you to follow. Check them out here.
Everybody’s got a bit of a past – especially when it comes to credit cards. Everything always looks a bit dire when you’ve got a bad credit score. It’s bound to be a process and a half to open up a new account, but never fear! We’re here to help you out with some of the little things, so read on to find out what you should know when it comes to banking with a bad credit report.
Bank Locally
You’re probably wondering where to start. You’ve got a terrible business credit report and been going over the numbers for hours, but before you go parading into a big bank, you might want to check out something more local. One of the best things about using a credit union is that the service is local and a lot more personal. They’re smaller and probably more likely to help you out.
If you go to a big bank with a bad credit report, they will probably charge you a bit more, and that’s if they even accept you in the first place. If you bank locally, you can save on big bank charges and in turn build up a rapport for your business in the local community.
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Make Friends with your Banker
Picture this: you’ve been on the phone with the bank for hours this week. You’ve been dealing with so many people and have had to explain your situation so many times in exactly the same way.Does this scenario sound familiar? Well, it doesn’t have to. Another way that you could go about trying to open up a new business account would be to form a relationship with somebody from your bank. That way, you’re talking to the same person every time, and they will be more equipped to deal with your situation and what you need.
This person can even vouch for you personally if they have dealt with you on a number of occasions. So if your credit score leaves something to be desired, you have a professional and personal connection with someone within the bank and that can sometimes be more helpful than numbers.
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Be Careful of Your Personal Credit Score
Something a lot of people forget when they start looking at opening a business checking account is that the bank will check your personal credit score, too. So, if you’re in a bit of trouble personally, you’d better watch out. The bank can go after your business account and check your business credit score as well. Don’t let that small detail catch you out! Too many people let this one slide and end up super embarrassed. You don’t want to have both a bad personal and business credit report. You’re welcome.
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Set Up an LLC
Speaking of poor personal credit scores, you can form an LLC, which will make things run a little smoother. To put that in layman’s terms, it just means that neither you nor your staff members can be held accountable for losses. If you can’t do that, another legal action put in place might help you out a bit. With your tax ID number, you can start up an entirely new entity, and that should separate your personal score from your brand new business account. So, it’s basically like starting anew, only this time, poor credit scores shouldn’t exist.
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Be Prepared for a Lengthy Process
A word of warning before you dive right into the legal entities and what-not: the banks can deny you opening a business account if they see your credit card history and/or activity. So, basically, don’t go buying a new pair of shoes right away. Before you get excited, just bear this detail in mind. It can be a lengthy process.
Banks are pretty powerful places. The people in them are like wizards – their words can make or break your chances of getting a new business account. It’s important to know that your bank can – and will – look at everything to do with your credit card, your credit score, and credit reports. They’re pretty savvy when it comes to credit reporting, inevitably.
Banks Keep Each Other in the Loop
Banks talk to each other. If you’ve got a credit issue with another bank, the bank wizards will bring that to your attention too. It’s important to be extremely careful and not let anything like this creep up on you because it could mean the difference between the magic word ‘yes’ or the dreaded ‘no’. A way to keep this at bay might be to check with your personal bank and just make sure that everything is in order. Good luck!
Featured Image: Thinkstock/© kieferpix
Posted on May 22, 2023