Can I Open a Business Bank Account With Bad Credit?

Concerned business owner with bad credit frowning at his laptop.

Good credit is an asset when you're starting or growing a small business. It's a key to accessing the loans and credit that make building a business possible. But do you also need good credit to open a business bank account?

If you have a low credit score or an unsteady credit history, you can still open a business bank account—though you may need to do some shopping around to find one that works for you. And if you've had any difficulties with either business or personal checking accounts in the past, finding the right financial institution and account option will make a difference. Here's more about why.

Is My Credit Score Checked for a Business Bank Account?

Most business checking accounts don't require a credit check, with the possible exception of accounts that offer an overdraft line of credit. Opening a business credit line or business loan typically requires a credit report and score check, including any business credit you've established and often your personal credit.

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Find Business Checking Accounts

While banks don't usually require a credit check to open a checking account, they often will run a ChexSystems report. ChexSystems is a reporting agency that collects information on checking and savings accounts, similar to the way credit reporting agencies like Experian collect information on credit. If you've had problems with checking or savings accounts in the past, these may show up on your ChexSystems report.

Here are examples of negative items that may appear on a ChexSystems report:

  • The bank or financial institution closed your account
  • You bounced checks
  • You overdrew your account
  • You have unpaid fees or credit balances
  • You used your card or account to commit fraud

What You Need to Open a Business Bank Account

You'll need to provide additional items to open a business bank account. The list of required items can vary from one financial institution to another, but generally speaking, you'll need:

  • Employer identification number (EIN) or Social Security number
  • Personal identification, such as a driver's license or passport
  • Business license
  • DBA certification
  • Corporate documents, such as articles of incorporation or partnership agreement

Whether you have issues with credit or ChexSystems—or both—you have two main routes to opening a business account. If you'd like to establish a banking relationship with a bank or credit union near you, contact a business accounts representative. Explain any concerns you have about your credit or past issues with checking accounts and ask what options they can offer.

The bank or credit union may not require a credit inquiry or ChexSystems report; they may also decide to overlook past issues and offer you a bare-bones account with the opportunity to build credit over time. If you hope to gain access to business credit cards, loans and merchant accounts in the future, establishing a banking relationship may be helpful.

If all you want now is a functioning business checking account, you can begin with your local bank or credit union, but also consider casting a wider net. Online banks may offer no-frills checking without credit inquiries or expensive fees.

Some financial institutions also offer second chance checking accounts designed to help people who've been denied accounts due to past banking problems. Choosing a second-chance account may mean paying a monthly fee and forgoing extras like overdraft lines of credit—at least to start—but you won't have to go without a business account.

How to Improve a Bad Credit Score

Even after you've opened a business banking account, improving your credit and polishing up your banking history are worthy goals to keep your options open as your business grows. Here's how:

Establish business credit, even if you start small. Opening a dedicated business bank account is a first step. From there, make sure you keep business and personal expenses separate. Apply for a business credit card and start using it responsibly month after month. If your credit is shaky, look for a secured credit card.

Clean up your personal credit. Until you've established business credit, banks and credit unions will likely use your personal credit as security. Though you can't instantly erase past problems, you can work toward improving your credit. Take this opportunity to create good habits: Pay your bills on time every month, pay down revolving debt and don't apply for new credit unless you need it. Check your free credit report and score to see where you can improve.

Check your ChexSystems report. Since problems on your ChexSystems report can prevent you from opening the business account you want, you may want to check your report pre-emptively before you start applying. You can access your report for free every 12 months from ChexSystems. Dispute any inaccuracies you find and, if you can, resolve any outstanding issues like unpaid fees.

The Bottom Line

Maintaining good credit and a clean banking history can help maximize your options whenever you need to open a new account, establish lines of credit or secure a loan to grow your business. In addition to checking your ChexServices report, check your business credit report and your free personal credit score and report from Experian. You'll get a clear picture of how your bank views you and the potential risk your business represents—and insights that can help you keep your credit in fighting shape over the long haul.