What is a business credit score? Plus 8 ways to improve it

Find out what a business credit score is, why it’s important and how to improve credit score for your business.

If you’re a sole trader, it’s your personal credit score that will matter when you’re looking for credit. Whereas if your business is set up as a limited company, lenders may also check your business credit score when you apply for a financial product.

What is a business credit score?

Like personal credit scores, business credit scores are based on financial history. They’re a measure used by lenders to decide whether businesses will be able to manage repayments.

The score usually ranges from 0 to 100. You want to have a score closer to 100, as a high score indicates creditworthiness and therefore a low risk to lenders. Whereas if you have a score closer to zero, you’d struggle to get credit.

If you’re opening a business bank account, applying for a business loan, or even just arranging a mobile phone contract, your business credit score may affect whether your application will be accepted. It can also impact the rates you’re offered.

Why having a good business credit score is important

If you have a poor business credit score – like if your business has missed loan repayments in the past, for example – you may struggle to access finance for your business. Or if you do manage to find finance, you may be offered very high interest rates.

If you have a good business credit score, you’re likely to find it easier to get credit and may be offered more competitive interest rates.

But it isn’t just about saving money – think about your businesses credit score as your financial reputation. This is particularly important with new suppliers or partners as it’s common for them to check your credit score before agreeing to do business with you. 

And if your business has a good credit score, you’ll be able to negotiate better your payment terms. If you wanted to spread the cost of a large order over a couple of months, for example, a good business credit score shows a supplier that your business is reliable. And much like how it works with banks, a business is more likely to be okay with you owing them money if you’ve got a good repayment history.  

This also illustrates the importance of doing your own credit checks on suppliers or partners you’re entering business with. Checking their financial reliability early can help you avoid late payments, fraud, and issues with cash flow. 

How to check the credit score for your business

It’s important to understand that your business doesn’t have a single business credit score. There are several credit reporting companies and each company uses its own methods and scoring system. Different lenders will use different credit reporting companies when they’re checking your credit score.

To find out your business credit score, you need to contact one of the business credit reporting companies. They may send your report in the post, or they may give you access to your credit score via an online account.

There are three main CRAs in the UK: Experian, Equifax, and TransUnion.

For example, you can access your Experian business credit score online. They have a subscription model for viewing your business credit report, and you can sign up for monthly access for £24.99 (+VAT).

What do referencing agencies know about you?

To check a business credit score, credit referencing agencies (CRA) collect information from your application form, as well as public records and companies you have relationships with. This can include:

• business name and address
• how many accounts you’ve had in the past six years, and when you opened them
• details of your regular payments – and if you paid on time
• some information from utility suppliers and mobile phone companies
• banks and credit card companies
• any people you’re ‘financially linked’ to – for example if you have a business partner, their credit history can impact your business credit score

How to improve your credit score for your business

These are some things you can do that may help to improve your credit score.

1. Check your credit rating 

incorrect information on your credit report can give lenders the wrong impression and might affect your credit score. Look into your score before you need to apply for credit to see if there’s anything that you might need to dispute or have corrected.

2. Open a business bank account 

If you haven’t already, open a business bank account in your business’s name. You might also want to consider taking out business credit, like an overdraft and a business credit card, to establish your business credit score – but it’s important to always make sure you’ll be able to keep up with repayments.

3. File on time 

Make sure you submit your accounts to Companies House and file returns before the deadline. Filing late can give the impression to lenders that you’re struggling financially. You might also consider having your accounts audited to give you peace of mind that there aren’t any mistakes in your reports.

4. Pay your bills on time 

Pay your bills and invoices on time and keep up with any credit repayments to avoid negatively affecting your credit rating.

5. Close accounts you no longer need 

If it looks like you have lots of credit available in multiple accounts, this may weaken your business credit score.

6. Limit credit applications 

Try to avoid making lots of credit applications in a short period. If you’re rejected for business credit, don’t immediately apply to another lender. Lots of credit applications on your record can make you look desperate for credit, which can negatively impact your rating.

7. Keep information up to date  

Always inform your contacts, suppliers, customers, and Companies House of any changes to your business status, contact details or location. If your records and correspondence show conflicting information, it can be a red flag to lenders, no matter how small the error is.

8. Check your personal credit score 

Finally, if you’re a startup or a small business with less than three directors, then lenders may look at your personal credit score as well as your business credit score. With that in mind, it’s a good idea to make sure you’re doing everything you can to improve both your scores, and to check them regularly.

You should conduct your own thorough research, including speaking to experts, before applying for credit.

Do you have any other questions about your business credit score? Ask them in the comments.

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