Your Guide to Business Credit Scores

A business credit score looks at the finances of a business and allocates a score to reflect its financial health. If you are looking to raise money or get credit, then a good business credit score is essential. Read on to discover how a credit score may impact your business and ways to improve it.

Sarah Bridge Published on 16 March 2021.
Your Guide to Business Credit Scores

Accessing credit in the form of loans, overdrafts and other borrowing is vital to many businesses, but their ability to do so depends a great deal on their business credit score.

What is a business credit score?

A business credit score looks at the finances of an individual business. It allocates a score to reflect its financial health in much the same way that a personal credit score shows the state of your personal finances.

A company’s credit score is calculated by various credit rating companies that look at a range of factors, from overall borrowings to how long the company has been trading, and come up with a number to reflect its creditworthiness. Lenders can look at this when they decide whether a business can take on more debt without putting its financial stability at risk.

Being refused credit can impact a business’s chance to borrow money, which will affect its ability to grow, so it’s best to have as high a credit score as possible. If you have a low credit score then all is not lost, as there are steps you can take to fix your business credit score. This ensures that lenders can see you in the best possible light when applying for a business loan or other types of business finance.

How to check your business credit score

There are several credit rating agencies that lenders use to determine a business credit score rather than one official credit score for each business. The main credit rating agencies in the UK for businesses are Experian, Equifax, Creditsafe and Dun & Bradstreet.

They all have their own way of calculating and displaying their scores. Different lenders will use different credit agencies, so it’s good to get an idea of your business credit score across several companies if you can. Most use a numerical scale to represent creditworthiness, such as Experian, which gives businesses a credit rating between 0 and 100, with 0 representing the highest risk and 100 the lowest. Creditsafe has a similar rating system: its business score shows the likelihood of a company becoming insolvent in the next 12 months, with 0 being very likely and 100 being very unlikely. The higher the business score, the more financially stable the credit rating agencies believe a company is.

As well as displaying your business credit score, you should get access to other business tools which reveal the major factors influencing your score, alert you to any changes to your score, and show what lenders see when they are evaluating your business for a loan application.

To sign up, you’ll need:

  • to be the owner or director of the company you’re researching.
  • personal details including home address, phone number, email and date of birth.
  • a valid debit or credit card.

How to check your business credit score for free

Often you will have to sign up for a monthly subscription to access your score and other information about your business, but many offer a free trial before you have to sign up to a monthly payment.

How will a poor credit score affect my business?

If your business has a poor credit score then you might find it harder to apply for finance for your business. You could be offered higher interest rates or find that applications are rejected. Conversely, if you have a good credit score then you will find you are eligible for a greater number of financial products and are offered more competitive interest rates.

It isn’t just lending terms that could be helped by having a good credit score. Unlike personal credit scores, business credit scores can be viewed by anyone, including customers, suppliers and potential business partners, which means that they could affect all parts of your business. Companies with strong credit scores could benefit from higher credit limits, lower insurance premiums and better lease terms on essential equipment such as machinery or property.

» MORE: Do you need a good credit score to get a business loan?

How can I improve my business credit score?

If you discover that your business has a low credit score, then you could find it difficult to borrow money, but the good news is that improving your business credit score can be straightforward. These are some of the most effective ways you can start to improve your score:

  • Ensure the information on file is correct Checking that all the information on your credit report is accurate and up to date means that your business is represented fairly.
  • Check your score regularly – By keeping an eye on your score, you will see any changes so that you can ensure that you are not adversely affected by wrong information added to your file.
  • Pay bills and invoices on time If you have any late or missed payments on your account, your credit score will be marked down.
  • Deal with CCJs straight away If you meet all your payments on time, you will avoid any County Court Judgments against you, which will negatively impact your credit score.
  • File accounts on time Late filing of accounts to Companies House is flagged up as a problem and is likely to affect your credit rating.
  • Do not over-apply for credit – Making several applications in a short space of time could signify to potential lenders that your company is in financial difficulty.
  • Manage your debt responsibly Having some debt or credit facility is good for your credit rating. It’s hard for credit rating agencies to evaluate how good you are at managing debt or credit without it.
  • Check your suppliers’ credit scores You can look at your partners and suppliers’ credit scores to see if they are in good financial shape.
  • Manage your personal finances responsibly While business credit scores and personal credit scores are separate, some lenders will take both scores into account.

For more information, read our guide below on how to improve your business credit score.

» MORE: How to improve my business credit score

How long will it take to improve my business credit score?

While you understandably might want to fix a poor credit score instantly, it takes time for your actions to filter through to the credit rating agencies. Expect a gap of a few months between improving your credit management, such as paying off a business credit card, and for it to have an impact on your credit score.

How do bad credit business loans work?

Securing your business funding if you have a poor business credit rating is often very difficult compared to those with a good credit rating. However, it is not impossible. Some business loan lenders specialise in what are known as “bad credit business loans”, these allow business owners with poor credit ratings to access business finance.
» MORE: How to get a business loan with bad credit

Image Source: Getty Images

About the author:

Sarah Bridge has been writing about business and finance since 2000. She was formerly Deputy Editor, Personal Finance, The Mail on Sunday and was previously the paper's Leisure Correspondent. Read more

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