In this article we look at what a business credit score is, and reveal some little known hacks to get your business in top shape. With a few little tweaks you could give your score a boost. After all, your business credit score can affect how potential lenders view you, as well as suppliers, so it’s worth putting your best foot forward.
What is a business credit score?
Business credit scores are based on a business’s financial history, and lenders use them alongside personal credit scores to decide whether a business is likely to repay debt.
Credit reference agencies use multiple data sources to build up a picture of how creditworthy your company might be. Typically, heavy reliance is placed on:
- Companies House information (length of trading, whether you meet filing deadlines, trends in financial accounts)
- Payment performance information (have you paid invoices on time, have you repaid finance on time)
- Public information (county court judgements, any company notices in the gazette)
Below we share our top 10 tips on how to fine tune your business’s credit score:
- Make sure that the turnover through your business bank account is as regular as possible. Long periods without credits can raise questions from lenders.
- If you have a business overdraft make sure your account balance is periodically in credit. This demonstrates that you are not over-reliant on the overdraft.
- Develop a history of successfully repaying borrowing. If nothing else, using a business credit card can be a positive.
- Pay your bills on time and keep up with finance repayments. Don’t max out your credit.
- Don’t make lots of finance applications in a short period. Lots of credit applications on your record can make you look desperate for credit, which can negatively impact your rating.
- Check your company credit rating with a credit reference agency. Make sure the information is correct and that there isn’t any adverse information that you are unaware of.
- File your accounts and annual returns with Companies House on time. It’s a red flag if you don’t.
- Try and show a growing balance sheet on your annual accounts. A declining balance sheet weakens your credit rating.
- Have any old charges that may be registered at Companies House, such as debentures, released if they are no longer needed. Having a debenture with one lender may stop another from wanting to lend.
- Make sure your registered office is correct. A common reason for getting county court judgements (CCJs) is that letters had been sent to the registered office but the Directors had not received them.
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