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What is your business credit score and how can your business improve it?

When your business is just getting started, the last thing you need is another setback when trying to get it off the ground.

A business credit score is more than just a representation of your creditworthiness with investors and potential partners. Low credit can make approval difficult, but it doesn’t have to be a barrier.

To get your business on track, our handy guide to improving your credit score tells you everything you need to know, including what can affect your score, why it’s important, and what you can do with a low score. It covers everything there is.

What is a business credit score?

Like personal credit, business credit is based on the company’s financial history.
Banks and other lenders (such as investors) look at your creditworthiness to determine your ability to repay and manage business loans and investments.
A business’s credit score ranges from 0 to 100, with higher scores indicating higher creditworthiness and less risk posed to lenders. If you have a low business credit score, it may be difficult to get a loan.
If you’re considering a business loan, bank overdraft, or other form of debt, your score will determine factors such as:

  • Interest rate
  • How much can i borrow
  • Whether the loan is approved

Unlike personal credit scores, business credit scores are visible to everyone. Suppliers, customers and other companies can therefore verify this.

What is a good business credit score?

Business credit scores range from 0 to 100. The higher your credit score, the better your business is financially and the more likely you are to be credited. A lower score means that borrowing is more difficult or the interest rates offered are less competitive than those offered to companies with higher scores.

Why is a good credit score important?

Just like a strong personal credit score can help you get the mortgage on your dream home, strong business credit can help you reach your business goals and take it to the next level.
A good business credit can also save you money in the long run by making the credit available at a low interest rate.

The following table explains what different credit scores mean for businesses:

Credit scoreWhat it means
0Bad – Failed company
1Bad – Imminently failing company
2 – 15Bad – Maximum risk
16 – 25Bad – High Risk
26 – 50Average – Above-average risk
51 – 80Good – Below-average risk
81-90Very good – Low Risk
91 – 100Excellent – Very low risk

Note: Figures above are based upon the Experian business credit score model.

What can affect my business credit score?

A combination of factors can affect a company’s creditworthiness, but there are some common issues that most companies can spot.

1. Overdue invoices
One of the most obvious and influential factors affecting a company’s creditworthiness is late payment of invoices. This applies not only to utility bills, but also to bills and other funds that are paying back borrowed money in installments.
Frequent late payments or no payments at all will negatively impact your score.

2. Number of times you applied for a loan

You can apply for a loan as many times as you like, but the more times you apply and get rejected, the lower your credit rating.

3. Exceeding the overdraft limit

Overdrafts appear as liabilities in your credit score, so lenders can see if you have an overdraft, your limit, and how much overdraft you’re using.

Consistently exceeding your overdraft limit or failing to make payments can affect your credit score as it can indicate to lenders that your business may be in financial trouble there is.

4. Too many credit checks
There are two types of credit checks:

  • A soft credit check is the first to check certain information on your credit report. Importantly, soft credit checks are invisible to businesses, so they don’t affect your credit score or loan application. Only your company can see them in reports.
  • A hard credit check is done when a company performs a full scan of its credit report. All rigorous checks are on file so the company doing the search can see that you applied for credit, when you applied, and your total.

Too many tough credit checks in a short period of time can trick lenders into believing you’re in financial trouble. When you apply for credit, the company you apply for will thoroughly review your credit report to determine if you are a good candidate for a credit option.

How can I improve my credit score?

There are many easy ways to improve your credit score to keep your business on the right track.

1. Pay your bills on time
One of the easiest ways to improve your credit score is to make sure all your bills and invoices are paid on time. Keep track of all your loan repayments so they don’t negatively impact your credit score.

2. Make sure your personal finances are sound
Personal and business credit ratings typically remain separate, although some types of credit bureaus check both. This is known as mixed grading.

If you’ve had too many failed loan applications in the past and your credit score is low, a high personal score may make you a good candidate for borrowing money from a lender.

If you need a start-up loan and have little financial information available, your lender can look up your personal account information and use it to calculate your business’s credit score.

3. Apply for a loan only if absolutely necessary
While it may be tempting to explore the various financing options available to your business, applying too many in a short period of time leaves a “footprint.” These footprints, often referred to as multiple searches, can trigger credit searches in your organization.

If you have financial inquiries, ask for a quote rather than submitting an application to avoid being listed on your credit report.

4. Properly prove the sale
By using your business account regularly over time, you can prove your annual turnover to your lender and increase your chances of borrowing.

5. Always have enough in your account
It may seem obvious, but make sure your business has sufficient funds in its bank account or an approved overdraft limit to cover the necessary payments. These payments are typically:

  • Standing order
  • Direct debit
  • Online payment
  • Cheques
  • Debit card payment

6. Submit a complete account
If you are a limited company, be sure to file a complete, unreduced account with Company’s House.
Make sure to submit your account before the deadline. A late submission may indicate to the lender that you are in financial difficulty.

What are my options if I have poor credit?

Don’t worry if your credit score is low. In addition to working to improve your credit score, you can also consider other debt and equity financing options.

Other Debt Options
Think overdrafts and business loans, as well as leases and installment loans. These loans still require a credit check but are intended to help businesses purchase machinery, equipment and vehicles to keep them moving. You can also refinance and consolidate business debt to keep your repayments low.

Equity Finance
Equity financing comes in many forms, and if you’re ready to invest more in your business, it might be for you.

Angel investors invest their money in new startups that are not yet established. Unlike other profit-oriented investors, angel investors are more convinced that a company will succeed because their money is at stake because they know that the company can fail.
To learn more about equity financing opportunities, read our guide to finding the right small business investor.

How can I check my credit score?

In the UK, many credit rating agencies offer free access to a company’s credit history. There are some exceptions if you need to pay to access your breakdown report or if you want to monitor your credit history over time.

1. Experian

If you’re looking for in-depth insight into your company’s financial performance, Experian’s My Business Profile subscription is perfect for small businesses.

Manage your credit score in real time or dive deep into the top 5 factors that affect your credit score.

You must be a registered director or owner of a company to sign up for the credit scoring service.

2. Creditsafe
If you are a director of a company of record, you can request a free credit report from Creditsafe. This includes:

  • Business review
  • Your creditworthiness and recommended maximum credit limit
  • Key risk indicators
  • Corporate information

You can also request a tailored solution for your business detailing the best tools to get your business off the ground.

3. Credit Passport

Another free service you can run to check your business’ creditworthiness is Credit Passport. His reviews are usually considered soft his requests, so you don’t have to worry about credits affecting his profile. The platform uses your bank details to show you how the financial system views your business. All reports produced by Credit Passport are approved and regulated by the Financial Conduct Authority (FCA).

Credit Passport also offers a subscription plan for £20 per month. This plan provides insights to build financial resilience and steps to get your finances on track before it’s too late.

4. Equifax

Like Experian, Equifax lets you order a single business report from their website. Free for the first 30 days, then €7.95 per month. His report contains the following information:

  • Credit information
  • Public record details
  • Company Profile
  • Business risk score

If you are a company secretary, director, business owner, or shareholder of a limited liability company, you can request an annual report.

Can I still take out a loan with bad credit?

Yes, it is possible to get a business loan with poor credit, but it will be much more difficult to get approved.

Bad credit is when a company is unable to fully repay its debts in a timely manner based on its past debt repayment history.

We can offer higher interest rates for those looking for bad debt loans. Small businesses are already considered riskier by lenders, so getting a low-credit startup loan can be especially difficult.

For more information, see our detailed guide to applying for a bad credit business loan.

Cutting your business costs with BED

If you’re looking to cut your business expenses and free up cash, BED’s team can help. Compare various key business assets such as business energy, business finance business insurance, Telecom broadband and more. If you need financing from cash flow to business expansion, you can also compare business financing options with our Business Loans team.

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