It’s important to maintain a good business credit score to access favourable lending rates. We explain what a business credit rating is, how to check it, and ways you can improve your score.
In order to grow, businesses need access to financing. There are a number of ways to attain this capital, with traditional forms of lending such as a commercial mortgage or a business loan just two options. However, these lenders will need some form of assurance that your business is in a position to repay its debt, which is why they’ll check your business credit score.
Like a personal credit score, improving and maintaining a healthy rating for your business has many advantages. So, below we explain:
- What is your business credit score?
- Where can I check my business credit score?
- Why is my business credit score important?
- How to improve your business credit score
Read more: Commercial mortgages explained
What is your business credit score?
A business credit score is a rating on how your company manages your finances. It works in much the same way as a personal credit score where financial institutions will use this rating to determine whether to lend you money. So, the higher the score the more likely you’ll be offered favourable rates.
According to Capitalise, a finance company, there are three main agencies which record your business’s credit rating in the UK. These are Dun and Bradsteeet, Experian and Equifax.
Get Experian business credit reports with Capitalise
Sign up with Capitalise and view your business’s credit rating through Experian. You’ll also receive personalised lending offers and a detailed analysis of what’s impacting your score.
Where can I check my business credit score?
You can check your business’s credit rating with each of these credit reference agencies, but if you do so for free your access will likely be limited.
With Experian, for example, you can only see your score for the first three months for free, after that it charges a £24.99 a month plus VAT. It’s a similar setup with Dun and Bradstreet. You’ll only be able to view your credit score for the first 14 days before you’ll be required to upgrade to its £195 a year plus VAT package to continue accessing this information.
As an alternative you could use the services from a third party provider, such as Capitalise. For £19 a month you can check your Experian score*, compare customised lending options, and find ways to improve your score.
Why is my business credit score important?
With a better business credit rating you’re more likely to access a wider range of funding options at cheaper rates. This means you can save more money in interest, which you can use to invest in your business’s growth.
Unlike a personal credit score, your business’s credit rating isn’t confidential and it can be accessed freely by the public. This includes potential suppliers, who may refuse to work with you if you have a record of not paying your bills on time.
What affects my business credit score?
There are a variety of factors that affect your credit score. These include:
- Payment history –Paying your bills on time can improve your credit score
- County Court Judgements and insolvency claims – If you can’t pay your current bills then your credit score will likely decline
- Access to credit – The amount of borrowing your business already has access to plays a role in determining your business’s credit score
- How you file your account – Businesses which take their time to file detailed accounts at the end of the year will likely see the benefit of a better credit score
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How to improve your business credit score
According to Capitalise, there are numerous ways to improve your business’s credit rating. This includes:
Make regular payments
One of the most significant ways to improve your business credit rating is to ensure all your bills are made on time. Like a personal credit score, missed payments are reported to the credit reference agencies which will lower your score.
This doesn’t just mean paying your energy bill on time or paying off your overdraft at the bank. It also means paying your suppliers too.
File a full account with companies house
When you start your business you’ll need to register with Companies House. Some businesses tend to provide minimal information at this stage by filing an abridged account – and it could really impact their credit rating. The more information that is in the public domain means credit reference agencies and lenders can make a more accurate evaluation of your ability to borrow. So consider taking the extra time to fill out a full credit score.
Make sure you have healthy personal finances
If you’re the director of a small to medium sized business or a sole trader, then your personal credit rating does influence your business credit score. If you’re looking for ways to improve your personal credit score, read our article.
Use a credit card to boost your score
If your business has just started trading and you’re looking to start borrowing then you may wish to consider a business credit card. Using this responsibly over a lengthy period will build a strong payment history which will positively impact your score.
Our guide lists some of the best business credit cards on the market.
Use a business bank account
Likewise, instead of using your personal account to send and receive money it may be worth exploring a business bank account. This can make it easier for credit reference agencies to evaluate how you manage your cash flow.
Our guide lists some accounts you may wish to consider.
Important information
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