How to improve your business credit score

Your business credit score is more than just a number – it can play a role in your business overall success when applying for finance.

This is because your credit score helps lenders, suppliers and other creditors to quickly evaluate whether your business will be able to repay the money that you’re borrowing on time each month and will be able to pay the full amount back.

What is a business credit score?

Credit reference agencies collect and maintain information about individuals and businesses’ credit behaviour in the UK.

A credit score measures the creditworthiness of your business. This is made up of a number of factors to understand the financial position of a business and its financial risk. 

Scoring ranges from 0 to 100 with 100 representing a low risk and 0 representing a high risk. 

Why is a credit score important?

When you’re applying for finance, banks and lenders will try and build a picture of you and your business. They will be looking into your circumstances and financial history. As part of the process, banks and lenders will use the data collected from the credit reference agencies to decide whether or not they will lend to you.

Credit reference agencies will record five key areas of your business’s credit profile:

  1. Your payment history
  2. Your total amount of debt
  3. When you held credit and for how long for
  4. The type of finance you have
  5. Any applications for finance you’ve made recently

    Whilst the main factors that will affect your business’ credit score are:

    1. The number of times you have credit alongside how recently
    2. Whether you pay your bills on time
    3. If there are any outstanding payments to your suppliers, vendors or creditors
    4. The number of years that you have been a trading business
    5. Whether you file your business accounts on time

    How can you improve your credit score?

    There is no guaranteed way to improve your business credit score, however there are a few steps that you can take to improve your credit score:

    • If you’re a limited company, make sure you file full rather than abbreviated accounts at Companies House.
    • As well as your personal accounts, your history of paying bills on time can affect your business credit score. Try to avoid negative repercussions by getting into the habit of being on time with bill payments.
    • Ensure that you have enough money in your account or have an approved overdraft limit to cover any upcoming payments.
    • Are your personal finances healthy? If you’re a start up with little business financial information available, lenders may use data from your personal accounts to calculate your business credit score.
    • Only apply for credit when you need it – if you make too many applications in a short space of time, it can come across like you are struggling to secure finance. When you apply for finance, it’s noted on your credit record. Therefore, you can speak to a broker and see if they provide you with an indication about the finance options available to your business or a ‘quote’ rather than submitting an application.
    • If any of your information such as your registered office address changes, notify suppliers and customers as well as Companies House as quickly as you can. A common reason for getting county court judgments (CCJs) is that letters have been sent to the registered office but the Directors have not received them.
    • Demonstrate your turnover by using your business bank account regularly and over a long period of time.
    • It may make sense to keep track of the business credit score of your business partners as them falling into financial difficulty could affect your circumstances and credit too.
    • File your accounts and annual returns with Companies House on time.
    • Use your credit however, don’t max it out. If you have a business credit card, it can be good to use it to help build your credit score up. However maxing out your card can be seen as you’re living beyond your means. So use it but not too much and stay on top of the payments.

    Monitor your credit score

    Lastly, you can’t figure out how to improve your business credit score if you don’t know what your credit score is. It’s important to check your credit score as a matter of routine admin – maybe once every quarter. 

    When you’re checking your credit score, make sure all the information on your report is correct. Any mistakes, even minor business name errors can lead to a bad credit score. If there is anything on your credit report that doesn’t look correct, you can inform the credit agency and they’ll investigate it further.

    There are a number of credit agencies that may hold a credit score for your business such as Experian, Equifax, CreditSafe and Endole.

    Your credit score will differ slightly between the agencies as they don’t all calculate scores the data the same way.

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