Best business bank accounts for bad credit and no credit check
If you have a less than perfect credit history, it's still possible to get a business bank account.
Can I open a business bank account with bad credit?
The answer is yes. If you have a poor credit history then it’s likely you’ll find it more difficult to gain access to some financial services, including a business bank account, but it is possible to open one.
You may have a bad credit score for a number of reasons, including missing payments on any bills you owe, or defaulting on mortgage, loan or credit card repayments. Your score will also be badly hit if you’ve been declared bankrupt or have had a county court judgement (CCJ) made against you or your business.
But there are measures you can take to increase your chances of being approved for a business account if you have bad credit, as well as some providers who offer business accounts without conducting a credit check (more on both of these things below).
How to prepare for a business account application
To give yourself a better chance of being accepted for a business bank account, you can take several steps to improve your credit score:
1. Make sure you’re registered on the electoral roll.
2. Check your credit report to ensure there are no mistakes on it.
3. Pay back any credit you owe on time.
4. Pay off as much as you can on any existing loans and credit cards.
5. Don’t make too many credit applications in one go.
6. Don’t apply for credit again immediately after being rejected.
How do I open a business account?
You’ll need to choose a banking provider to go with and apply to them individually (although don’t make lots of applications at the same time, as multiple rejections will further harm your credit score). Each bank will have its own process (many are online) for opening a business account and will require different documentation, including things such as your personal details, ID verification and the name of your business.
Some providers may also go further, conducting credit checks and asking you additional information about your business and its finances.
It might be worth approaching your current banking provider first (a bank that you have other financial products with, such as a personal current account or credit card). If you’ve used any existing accounts sensibly, your bank will be able to see this and take it into account when looking at your new application.
If you have a bad credit history, another outcome here is that your provider may offer you a basic version of a bank account first, to get you started on rebuilding your credit score. You can then look into moving to a full business account at a later date.
For more information on the range of business accounts that exist in the UK, visit our business banking section.
Is it possible to open a business account without a credit check?
Yes, it is possible to open a business bank account without a credit check. Examples of providers that offer this are Cashplus and Card One Money. The process is usually fairly quick, with approved accounts opened in anywhere from a few minutes to a few hours.
This type of banking provider will still require some contact details from you and will check that your business is registered, but they won’t conduct a credit check.
However, do bear in mind that business accounts which target banking customers with a poor credit history do often come with higher fees than some of the other business accounts on the market.
What about business accounts for bad credit at mainstream banks?
If you have a poor credit history, it’s likely to be more difficult to get a business account with a traditional high street bank, as they don’t tend to offer business accounts that cater for people with bad credit.
There’s a raft of new digital-only business account providers in the UK now, who don’t conduct credit checks when you apply. So it’s worth looking at those as an alternative to the big banks (although be sure to do your research on any account fees that are involved).
What can I do if I have been refused a business account?
If you’ve been refused a business account, it’s worth re-visiting your preparations to make sure you have all your finances and documentation in order. This includes making sure your business is registered, that you personally are on the electoral roll and that you’ve done all you can to improve your credit score. As mentioned above, if you haven’t already, you could consider approaching your existing bank to open a business account.
There’s also the option of going to a business account provider that doesn’t carry out credit checks at all, but be aware that the fees associated with these accounts are among the least competitive out there.
What credit score do you need to open a business account?
It is impossible to answer this question for a number of reasons.
First off, different bank account providers will have different limits when it comes to accepting applicants with low business credit scores. Also, these banks have a choice of different credit reference agencies using different algorithms to measure your score.
On top of that, your credit score is only one factor used to determine your eligibility for a business bank account. If your business scores well for other eligibility criteria, a bank may be more willing to overlook a poor credit score.
What is a soft credit check?
A soft credit check, or soft search, is a search on your credit file that won’t affect your credit score. Although a soft credit check will still be recorded on your credit report, it won’t leave a mark for other lenders to see, so it won’t affect your ability to get credit.
In comparison, a hard credit check, or full credit check, will leave a mark on your credit file which is visible to other lenders. Hard checks can have an impact on your credit score and lots of searches in a short space of time can make you look desperate for credit. This can reduce the chances of your application getting accepted.
How do digital-only banks compare to traditional high street banks?
One of the biggest advantages of applying for a business account with a digital-only bank is that a number of them won’t conduct full credit searches. This means that if you have poor credit, or your business simply hasn’t built up a credit history yet, a digital-only bank can provide an alternative to the big high street banks.
Digital-only banks also have many other advantages over high street banks. For a start, the application process is usually easy and straightforward, and often your account will be up and running the same day you apply. Digital-only accounts also tend to offer more innovative features compared to high street business bank accounts. For example, your account might link to accounting software or you might have access to budgeting tools.
However, bear in mind that because many digital-only banks don’t carry out credit checks, this means they also won’t offer an overdraft. In comparison, most high street business bank accounts will offer credit products such as an overdraft and business credit card.
How to get your credit back on track
If you have a poor credit history, the good news is there are plenty of steps you can take to get your credit back on track.
Prepare a solid business plan
Having a well-presented, thorough business plan will help to show lenders you’re serious about your business, have a good understanding of the financials and know where you want to take the business in the future. It should include an explanation of what your business does, financial projections and an overview of the market as a whole.
This step is particularly important if you’re opening an account with a high street bank as many will require you to have an appointment with a business adviser. If you’re opening an account with a digital bank, you’re unlikely to need a business plan, but having one can still help you and your business.
Check your credit report
The next step is to check your credit report as this will enable you to fix any issues before you apply for a bank account. If you spot any mistakes, such as an incorrect address or outstanding debt that you’ve since paid off, contact the credit reference agency as soon as possible and ask them to correct the error.
If you are unable to get a mistake fixed, you can add a Notice of Correction to explain what happened. This should be no more than 200 words but could be useful if you missed a payment due to ill health, for example.
It’s also a good idea to check how your address is listed on your report and make sure you copy this format whenever you apply for credit. It might seem minor, but even little things like this can cause problems.
Get on the electoral roll
It’s also important to check that you are listed on the electoral roll at your current address. Lenders use the electoral roll to verify your identity which can have a positive effect on your credit score.
Reduce your credit utilisation
Your credit utilisation ratio is how much of your available credit limit you’re using and the lower it is, the better, and the more attractive you’ll be to lenders. As a rule of thumb, it’s best to keep your credit utilisation ratio below 30%.
To do this, try to pay off some or all of your outstanding balances on credit cards, store cards or an overdraft at least three months before applying for a bank account.
Register with HMRC
Under current tax rules, you must register with HMRC within three months of trading. It’s also best to do this before you apply for a business bank account. If you don’t, there is a chance your application could be rejected, even if you’re applying for an account with guaranteed acceptance.
Pros and cons of business bank accounts for bad credit
- Allows you to bypass a credit check.
- Can be a quick process.
- Can help to improve your credit score.
- Must apply individually to protect credit score.
- May be a basic account at first.
- May come with higher fees.
- Harder to secure with traditional high street banks.
It is possible to open a business account with bad credit, even though it won’t be as easy a task as if you had a good credit history. There are new financial providers (mainly digital-based), who specialise in offering these type of accounts and try to make the application process as seamless as possible. However, it’s still important to compare the account features and the fees involved, to make sure what you sign up for is the right business banking solution for your business.
Frequently asked questions
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