Having a strong business credit score is crucial for the success of your business in the UK. It affects your ability to secure financing and favourable terms for loans and credit lines. But what if your business credit score is not in great shape? Don’t worry; there are ways to improve it. In this article, we’ll discuss practical tips to enhance your business credit score, even if you’ve faced financial challenges in the past.
Understanding Your Business Credit Score:
Before diving into tips to improve your credit score, let’s clarify what a business credit score is and why it matters. Business credit scores, just like personal credit scores, are numerical representations of your creditworthiness. They are used by lenders, suppliers, and creditors to assess the risk of doing business with your company. In the UK, credit agencies like Experian, Equifax, and Creditsafe play a significant role in calculating and maintaining these scores.
Tip 1: Monitor Your Business Credit Report Regularly
One of the first steps in improving your business credit score is to monitor your credit report regularly. Errors can happen, and inaccuracies on your credit report could be dragging your score down. Checking your credit report allows you to spot any discrepancies and correct them promptly.
Experian
Experian offers a three-month free trial to view your business credit report. Monitoring your score over three months will also give you the opportunity to view if any errors have been rectified and how it has affected your score. Just make sure to cancel your trial if you do not want to incur the 24£ monthly charge after that!
CreditSafe
Creditsafe offers to get your own company credit report for free. You need to be a registered director of the company and sign up to their platform to access the report. In return you get to see your business’s credit score in real-time, insights on what is impacting your score and alerts about any changes.
Equifax
Equifax unfortunately currently does not provide an easy way to access your commercial credit report. You have the right to request a copy of your report to be sent by completing the request form included in this guide. The report should be posted to you within 28 days.
Dun & Bradstreet
D&B offers a 14 days preview to their CreditMonitor platform allowing you to view your general risk score, as well as specialised risk scores showing their assessment on your company’s ability to meet its debt and cash flow obligations. Once the 14 days are up, you will retain access to your company profile overview and the overall business risk score.
Btw: Most consumer credit agencies will offer similar services for your personal credit score (some even for free!). The tips here also apply to your personal score, so it worth keeping an eye on your consumer credit report.
Tip 2: Pay Your Bills on Time
Consistently paying your bills on time is one of the most critical factors in building a strong business credit score. Delinquent payments can significantly damage your creditworthiness.
When a bill goes unpaid, especially if it’s for a business loan, credit card, or supplier invoice, the creditor may report the late payment to business credit bureaus. This late payment will be recorded as a negative mark on your business credit report. The severity of the impact on your credit score can depend on several factors, including how late the payment is, the amount of the unpaid bill, and your overall credit history.
To build your business credit, it’s essential to establish and maintain good payment habits going forward. Pay all your bills on time and in full to demonstrate your creditworthiness. Use a system to ensure that all your bills, including loans, credit card payments, and suppliers’ invoices, are paid on or before their due dates.
Tip 3: Make sure your Companies House information is up-to-date
It’s essential to keep your company status active by meeting all filing deadlines and submitting necessary documents on time. Late filings or a dormant status can negatively affect your credit rating, as it might indicate financial instability or lack of transparency. If your business has undergone a period of dormancy due to seasonal fluctuations, make sure to resume regular filings and update your status promptly.
Ensure that all company details such as address, directors, and shareholders are accurate and reflect the current state of your business. This information is often used by credit agencies when assessing your creditworthiness.
If you are a limited company, it can be helpful to file full accounts as opposed to just abbreviated ones. Full accounts provide a more comprehensive view of your financial health, and timely submission showcases your commitment to transparency.
Tip 4: Make sure your personal finance are healthy
If you run a startup or small business with overall little information available, lenders might also look at the personal credit scores of the directors to supplement the business report. It is important to note that lenders have to get your consent to check your credit score, so read carefully.
Some information like CCJs etc are also publicly available and can be accessed without your consent. Also note that a county court judgment (CCJ) or High Court judgment is likely to harm your business credit rating, as well as your personal one. Learn more at GOV.UK.
Conclusion
By implementing these tips and fostering financial responsibility, you not only improve your business credit score but also establish a foundation for sustainable growth and credibility. Remember, building a strong credit profile is an ongoing process that requires diligence and a proactive approach.