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Opening a Business Account When You Have Bad Credit

Updated Oct 24, 2023

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If you’re launching a new business and need to open a bank account, you may wonder how a poor credit score will affect the process or if you’re even able to open an account. Here’s what you need to know before you try to open a business account when you have bad credit.

How does your credit affect opening a business bank account?

Banks want to know how you manage your finances before they give you an account. They want to see the payment history on your credit cards and loans. Paying late or missing payments hurts your ability to secure a business bank account. You may not be asking the bank for a loan, but in their eyes, you still pose a potential risk.

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When a bank considers you for a business bank account, it follows these underwriting steps:

The bank will check your business’s credit.

Banks doing their due diligence can confirm your previous banking and credit histories in several ways.

“Opening a small business account is really no different than opening a regular checking account,” said Tevis Verrett of Triumvirate Advisors.

If you’ve had problems with another bank, you will have to address those issues before opening a new bank account.

“The banking institution will probably be subscribed to ChexSystems,” said Verrett. If account seekers “have run afoul of another bank, they will be unable to open any account until they get their ChexSystems rating cleared up.”

It will evaluate your personal credit.

While you may choose to open a business bank account as a sole proprietor, this may not be a wise decision if you have credit issues.

“You can open a bank account as a sole proprietor, but this bank account will be tied to your personal financial status,” said Tiffany Wright, president of The Resourceful CEO, a financing advisory firm for small to medium-size businesses.

If you have judgments or liens against you personally, your business bank account can be seized, Wright said.

“I know most small businesses operate as sole proprietorships, but this is another good reason to form a separate legal entity for your business,” she said.

It may place restrictions on your account.

If you have poor personal credit and you attempt to open a business account as a sole proprietor, you may not get very far.

“The biggest risk is that the bank may check your credit score before opening the account, and if the bank deems the score too low, [it] may not allow you to open the account,” explained Wright.

A poor credit score could limit other business banking activities, Wright added.

“You may not qualify for some of the credit-based services, such as account overdraft protection, an overdraft line of credit or business credit cards,” she said.

Though it’s fairly easy to open a basic business bank account with weak credit, applying for commercial credit lines based on a poor personal credit history is difficult, said Verrett. 

As Verrett has learned helping businesses obtain financing, a variety of personal credit factors come into play. These factors include one’s credit score, their credit activity history and credit card usage, Verrett said.

“It is based on a minimum 720 FICO [score], 10 years seasoning of the credit history and 20% on credit card utilization,” he said.


Your personal credit score and checking account history impact your ability to open a business checking account.

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What is ChexSystems?

ChexSystems provides banks with information about how consumers manage their checking and banking accounts. The agency evaluates all current and past accounts and looks for overdraft accounts, unpaid bank fees, and bounced or fraudulently written checks. It assigns consumers a score, which ranges from 100 to 899, based on these activities. The higher your score, the less of a risk the banks consider you to be.

If your score is low, the bank will deem you as a higher risk and will reject your application.


ChexSystems tracks consumer banking behavior, assigns consumers a score and reports it to the banks.  Scores range from 100 to 899; the higher your score is, the less risk you pose to banks.

How to get a business bank account when you have bad credit

Having a low or bad ChexSystems score doesn’t entirely preclude you from getting a business checking account. There are five steps you can take to improve your odds:

1. Form a relationship with the bank.

Wondering how you can establish a solid business relationship with your bank when your credit is tarnished? Holly Signorelli, a financial expert and owner of Holli Signorelli CPA, advised working with a particular person.

“Make sure you have one person that you deal with,” said Signorelli. Having one contact is important when cash-flow problems arise.

“Personal bankers will assist with these types of issues that can snowball,” Signorelli said. “It’s easier to communicate with one person who knows you than to run to the bank in a panic if you think a check is going to bounce.”

2. Clean up your ChexSystems report.

First, request your free ChexSystems report, which you’re entitled to annually.  You will be able to see why you were turned down, enabling you to identify areas that need improvement.

Read your ChexSystems report to see if errors exist. If you find an error, dispute it with ChexSystems. This process can take up to 30 days, but it could result in the item being removed and your score improving.

It’s also important to clear outstanding bank fees or debts that are hurting your ChexSystems score. That will also boost your score. Once you resolve any outstanding debts, ask the financial institutions that reported you to update their reports – this will speed up the process.

3. Forming an LLC might help.

Wright has one simple tip for aspiring small business owners with bad credit: “If you have a poor personal credit score, form an LLC, corporation or similar separate legal entity,” she said.

It’s also important, Wright added, that you get a tax identification number. This number identifies your business as a tax-paying entity separate from you as an individual. The next step? Use the new business entity to open a bank account.

“The business bank account is the first step in building credit for your business separate from yourself,” said Wright. “Even if you have great credit, you will protect your personal credit by keeping your business credit inquiries off of your personal credit report.”

4. Consider a credit union.

Rather than applying at a big bank, search for a local credit union. The personalized service and attention to individual business situations can make life a little easier your business.

“When you are new, and especially if your credit is not stellar, larger banks are more likely to hold deposits and make you pay higher fees,” said Signorelli.

This is bad news for cash-strapped new businesses. “Holding deposits on a small business, even for just two days, can cause major cash-flow problems,” she said. Signorelli noted that some big banks hold deposits up to 10 days.

Before your appointment, ask the representative if a personal credit check is required to open the account, as some credit unions do this as part of the process of opening a business account.

5. Apply with a bank that doesn’t use ChexSystems.

There are a handful of banks, including Chime Bank and BBVA USA, that won’t run a ChexSystems report when considering you for a business checking account. There are also local banks that may not consult with ChexSystems.

Key TakeawayKey takeaway

There are several ways to get a business checking account when you have bad credit. Establish a relationship with your local bank, obtain your free ChexSystems report and work on resolving the issues in the report, and, as a last resort, work with a bank that won’t use ChexSystems to check your score.

Additional reporting by Sarita Harbour. Some source interviews were conducted for a previous version of this article.

Donna Fuscaldo
Staff Writer at
Donna Fuscaldo is a senior finance writer at and has more than two decades of experience writing about business borrowing, funding, and investing for publications including the Wall Street Journal, Dow Jones Newswires, Bankrate, Investopedia, Motley Fool, and Most recently she was a senior contributor at Forbes covering the intersection of money and technology before joining Donna has carved out a name for herself in the finance and small business markets, writing hundreds of business articles offering advice, insightful analysis, and groundbreaking coverage. Her areas of focus at include business loans, accounting, and retirement benefits.
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