Your business credit score is a measurement used to represent the status of your business’ financial health. Having a good business credit score will signify financial stability and creditworthiness to any existing and potential customers, partners, suppliers and lenders. This means that whether you’re looking for a business loan, tendering for new work, or trying to secure better supplier terms, your business credit score will play a vital role.
How is a business credit score calculated?
Credit bureaus will calculate a business’ credit score based on publicly available information and any information that is reported to them. This means that if there is out of date information on public record, or simply not enough information about your business, your credit score might not be a true reflection of how you’re really doing.
For example, business credit scores for smaller businesses typically get updated when there is a new event, such as your annual accounts being filed at Companies House. However, by the time these are filed, the reporting may already be old and out of date, so they might reflect the current reality of your business. Also, if you file abbreviated accounts, there will be less information for the credit bureaus to give an accurate representation of your business, which could potentially result in a lower score.
Reviewing your credit score
To ensure businesses can have an accurate and up to date credit score, FSB members have the opportunity to have their Experian credit score reviewed with Capitalise’s Credit Review Service. By confidentially sharing more information about a business’ current trading position, Experian are able to recalculate the business credit score and suggested credit limit. In 96% of cases, this results in a positive improvement.
8 tips for improving your business credit score
To build and maintain a good business credit score, there are a few useful tips you should follow.
1. Ensure you pay all bills on time
Making punctual payments to all suppliers, lenders, utility providers and creditors is a crucial way to build a good business credit score and avoid a negative impact. By consistently meeting all of your payments, it demonstrates that you are a reliable business and have financial discipline.
You should try to avoid any bounced or rejected payments, or missing payments for any credit accounts, as these will all negatively impact your business credit score.
2. Check your business credit score
By regularly viewing and monitoring your business credit score, you can check for any errors, inaccuracies, or fraudulent activity that could have a negative impact.
You can ensure your business credit score is accurate by using the Credit Review Service with Capitalise. This process enables you to provide updated information to Experian to review your business credit score.
3. Build up credit history
Establishing a credit history will help to demonstrate your business’ creditworthiness. You could do this by applying for a short term business loan, or a credit facility. As long as you use these responsibly and ensure timely payments, this will help to build a positive credit history. In the long term, this could make it easier for your business to access larger loan amounts in the future.
4. Maintain good relationships with your suppliers and lenders
If you establish a track record of trust and reliability with other businesses, this could positively impact your business credit score. You can do this by meeting all financial obligations and communicating openly with suppliers and lenders.
If you have any outstanding debts, ensure to settle these as soon as you can ro avoid any creditors reporting late payments to credit reference agencies.
5. Avoid multiple loan applications at once
If you apply for a business loan, generally the lender will run a hard credit check on your business. Too many consecutive credit checks could harm your business credit score, so you should avoid too many within a short period of time. If you do need to look for a business loan, you should work with an expert who can help determine a small pool of lenders best suited to your needs. For information on how to apply for a business loan, just head to the funding hub.
6. Run credit checks on the businesses you work with
Being aware of any risks to your business can help to reduce the impact to you and your credit score. One effective way to do this is by checking the credit profiles of the companies that you work with. By running credit checks, you’ll be able to see if any customers, suppliers or partners are potentially facing financial difficulty, so you can take action early on.
You will be able to check your business credit score, the credit scores of other companies and receive dedicated support on funding applications all in one place using Capitalise for Business. Just head to your dashboard to get started.
7. File company accounts on time
Company accounts are a key source of information for credit bureaus and are the biggest contributor to a business’ credit score. It's important that you don't delay filing and that you file accounts in a consistent manner. You should also try to ensure that all director's details are kept up to date and Confirmation Statements are filed on time.
8. Maintain healthy cash flow
If your business bank accounts are enrolled to share data with credit reference agencies, you should ensure that these reflect a healthy cash flow. It’s also best to close accounts which are not active, as this will negatively impact your business credit score.