UK Credit

A Simple Guide to Improving Your Business Credit Score

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

If you are an independent merchant, your personal credit score will count when looking for credit. While if your business is incorporated as a limited liability company, lenders can 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. This is a metric used by lenders to decide whether businesses will be able to handle repayments.

The score usually ranges from 0 to 100. You want to have a score closer to 100 because a high score indicates creditworthiness and therefore low risk for lenders. Whereas if you have a score closer to zero you would be hard pressed to get credit.

Whether you’re opening a business bank account, applying for a business loan, or even just arranging a mobile phone deal, your business credit score may impact your application acceptance. It may also have an impact on the rates offered to you.

If your business credit score is low – for example, if your business has missed loan payments in the past or if you’ve made multiple unsuccessful credit applications – you may find it difficult to access financing for your business. Or if you can find financing, you may be offered very high interest rates.

If you have a good credit rating for your business, it will likely be easier for you to get credit, and you may be offered more competitive interest rates.

How to Check Your Business Credit Score

It is important to understand that your business does not have a single business credit score. There are several credit reporting companies and each company uses its own methods and rating system. Different lenders will use different credit reporting companies when checking your credit score.

To find out your business credit score, you should contact one of the business credit reporting companies. They can send your report by mail or give you access to your credit score through an online account.

There are three major credit referral agencies (CRAs) in the UK: Experian, Equifax and TransUnion.

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

What Do SEO Agencies Know About You?

To check a business credit score, rating agencies collect information from your application form, as well as public records and companies with which you have a relationship. This may include:

  • company name and address

  • how many accounts you have had in the past six years and when you opened them

  • details of your regular payments – and if you paid on time

  • certain information from utility providers and mobile phone companies

  • banks and credit card companies

  • everyone you are “financially related” with – for example, if you have a business partner, their credit history may impact your business credit score

How To Improve Your Credit Score For Your Business

Here are some things you can do to improve your credit score.

Check your credit score – Incorrect information on your credit report can give lenders a bad impression and can affect your credit score. Examine your score before applying for credit to see if there is anything you might need to dispute or have corrected.

Open a professional bank account – if you haven’t already done so, open a professional bank account in the name of your company. You may also want to consider taking out business credit, such as overdraft and a business credit card, to build your business credit score, but it’s important to always make sure you’ll be able to keep up with repayments.

Deposit on time – make sure you submit your accounts to Companies House and file returns by the deadline. Filing late can give lenders the impression that you are in financial difficulty. You may also want to consider having your accounts audited to make sure there are no errors in your reports.

Pay your bills on time – pay your bills and bills on time and track any credit repayments to avoid negatively affecting your credit rating.

Close accounts you no longer need – if it looks like you have a lot of credit available on multiple accounts, it can weaken your business credit score.

Limit credit requests – try to avoid making a lot of credit requests in a short period of time. If your business credit application is denied, do not immediately apply to another lender. There are many credit applications on your record that can make you feel like you are in desperate need of credit, which can negatively impact your rating.

Keep information up to date – always notify your contacts, suppliers, customers and Companies House of any changes in your business status, contact details or location. If your records and correspondence contain conflicting information, it can be a red flag to lenders, regardless of the size of the mistake.

Also check your personal credit score
Finally, if you are a start-up or a small business with fewer than three directors, lenders can review 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 of your scores and to check them regularly.

You should do your own thorough research, including talking to experts, before applying for credit.

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

Photograph 1: Lovelday12 / stock.adobe.com

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