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Opening a merchant services account — whether it’s a low- or high-risk merchant account — requires an application. Running a credit check serves as one of the application’s purposes. Credit reporting bureaus track your credit score by verifying your SSN (Social Security number) or TIN (Taxpayer Identification Number); you will need to include one of these numbers on your application. By this point, you may wonder why you need a credit check to set up a merchant account. Good reasons exist for this requirement, but they don’t always disqualify you from opening an account.
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A Social Security Number (SSN) is an account number that all natural-born citizens receive automatically. Certain groups of non-natural born citizens are also able to apply for an SSN if they have all the correct documentation. The SSN usually enters discussions when someone applies for a job, opens a credit card account, seeks a mortgage, or applies for a high-risk merchant account.
The SSN links to Social Security taxes generated from employment income. Each person who has an SSN and a job must pay into one’s Social Security account throughout his or her working years. This pension gives people a reliable income once they reach retirement age and are no longer able or no longer desire to work.
The SSN also helps to track a credit history. By using an SSN to get a credit score, business owners face a difficult time attempting to escape from a non-payment of debt record.
The Internal Revenue Service (IRS) provides a Taxpayer Identification Number (TIN, also known as the ITIN) to foreign nationals who can’t otherwise use an SSN. This number works the same as an SSN, but those who have a TIN do not receive pension benefits.
But those who use the TIN can open a checking account, apply for credit cards, and generate a credit score. In the event people become eligible for an SSN, they can then transfer their credit history from their TIN to their new SSN.
Requiring a credit score to accept credit cards seems counterintuitive. But a reason exists for the requirement: The merchant service provider extends credit to you and your business when you process a credit card. The provider places the money into your account but expects the money to be available if a refund, aka a chargeback, occurs. If you decide to go out of business or declare bankruptcy, and customers request chargebacks from their credit card provider, the merchant service provider is responsible for the money.
If you want to open a merchant services account, and your credit score isn’t as good as it should be, you’re not out of luck. A high-risk merchant account provider uses different underwriting standards to open an account and doesn’t rely only on credit scores. You can get your business running without your credit score to prevent you from qualifying for an account.