The following is intended as general information and best practice and does not constitute specific advice for your business.
What Is a Business Credit Score?
Just as with personal credit there are a number of credit reference agencies such as Experian and Creditsafe which collect and analyse data on companies.
The agencies use data such as Companies House information and reports from suppliers on prompt/ slow payment to produce a credit score and apply suggested credit limits.
That score is used by banks and other lenders when assessing loan applications. Some lenders will rely solely on data like this to achieve rapid credit decisions whereas others are more interested in analysing fresh info such as bank statements.
Credit scores are also used by suppliers when offering payment terms and customers when choosing a reliable supplier.
Your credit score is always retrospective and improved performance can take a while to filter through. It also doesn’t take into account plans for growth or forecasts.
What Can I Do to Improve My Business Credit Score?
As with all things ‘algorithm-based’ it can appear that there is an element of black magic involved in reaching a credit score however there are a number of practical steps you can take to give your business the best chance possible.
Keep Companies House submissions up to date – annual accounts are probably the biggest single factor that feed into your credit score so these should always be filed on time, but also don’t forget about other submissions such as address changes and annual returns. If you have had a particularly strong year, it could be worth filing early rather than just ‘on time’ to take full advantage of an improved credit score.
Pay suppliers on time – many of your suppliers will share data with credit reference agencies so make sure they are paid on time.
Avoid County Court Judgements – CCJ’s follow you around like a bad smell for years. If you do receive one you should look to resolve it and if possible have it removed asap.
Ensure you don’t go beyond your overdraft limit.
Only apply for credit when you want it – some credit checks leave a footprint on your file. If you have a number of these within a short period it could give the impression that you have been declined by lots of lenders. Whilst it can be tempting to see what’s available to you it is best to only apply for credit when you need it.
Don’t forget your personal credit score – some types of finance will take personal credit into consideration as well as business.