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Your Business Credit Score

You know your business has a credit score, you know it's important, but have you seen it recently? The answer is 'probably not' as most people don't know how to check their score or how to interpret the results. In this article, we explain what goes into your business credit score and show you how to manage it effectively.

Why not order a credit report on your own business?

A ComRes survey carried out in 2014 for Experian asked financial decision makers of UK SMEs about their credit situation. The results below highlighted the fact that directors of small businesses were often unaware of what influenced their credit rating, let alone how to improve it.

  • Only 13% could correctly identify all the key factors that influence the credit rating of a business
  • 59% of small firms had never checked their commercial credit score, of those that had, over half (56%) hadn’t checked within the previous six months

Credit checking businesses is an essential element of maintaining good cash flow and credit control. If you’re not credit checking your customers then how do you know who you are doing business with?

Why is a Credit Score Important?

Banks check your business credit score when you apply for things like loans and credit cards. The score is a number generated by a Credit Reference Agency (CRA), indicating how reliable you've been with past repayments, and how likely you are to pay late or not at all. Lenders will set rates and terms based on this information to mitigate any risk, so it's in your interest to maintain a good credit score to make it easy and obtain more favourable rates to obtain credit when you need it. A strong credit score can also help in other ways – such as when competing for tenders, negotiating business contracts and terms or looking to work with new suppliers

How to Improve your Credit Score

A healthy credit score is made up of three key elements: robust information, sound financial management and regular monitoring.

The following tips will help you manage your score more effectively:

  • Keep Records up to Date
    Inform customers, suppliers, Companies House, HMRC and CRAs of changes to location or business status. Out-of-date or inconsistent information will make your business appear unreliable.

  • Pay Promptly
    Pay invoices on time wherever possible. Payment terms are a form of credit, so failure to do so will damage your credit rating. Some CRAs have access to information avout payments made to a panel of their own customers and so can see whic businesses are paying their invoices on time and which aren't. If a CCJ is issued against the business then pay it or dispute it promptly as this will have an adverse effect on your score.
    Of course, paying your suppliers on time is much easier if your customers are paying you promptly. Credit control is now available on an outsourced basis or our online business debt collection service can help with the occasional late-paying customer.

  • File on Time
    Always submit accounts and returns by the deadline. Late filing can indicate financial problems

  • Limit Credit Applications
    This may lead to credit searches on your business, which are recorded on your credit record. Too many in a short period can suggest a business is struggling to secure funding, impacting your credit score. When enquiring about finance, ask for a quote instead.

  • Check your Score
    Obtaining access to your business' credit report and checking your score each month can help you avoid unpleasant surprises. It will also alert you when your company's credit record changes so you can act quickly to rectify any potential issues or inaccuracies. There are many CRAs you can use to access this information and our next article looks at this is more detail.

  • Keep an eye on Customers and Suppliers
    Monitor the credit score not only of your customers but also your most business-critical suppliers. This will enable you to limit the damage to your business should any of them start to encounter financial difficulties and be unable to pay you (in the case of customers) our supply you important goods or services (in the case of suppliers). By monitoring any significant changes to their business, change of address, any CCJs issued against them you are protecting your own business from harm.

  • Be Open and Share Information
    If a CRA contacts you requesting information, for example management accounts, then be open and forthcoming. Ignoring requests could look like evasiveness and certainly won't help your rating.

How we can Help:

Get a Credit Report on Your Own Business

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