How to check and improve your business credit report

In today’s competitive and rapidly evolving business landscape, the importance of a strong credit score cannot be overstated.

Just as personal credit scores play a vital role in financial well-being, business credit scores are critical for establishing and maintaining a company’s financial reputation.

A robust business credit score serves as a key indicator of a company’s creditworthiness, influencing its ability to secure financing, negotiate favorable terms with suppliers, attract potential investors, and even win new customers.

It serves as a measure of reliability and trustworthiness, allowing businesses to build solid relationships within the marketplace and pave the way for long-term success.

As such, understanding and actively managing one’s business credit score is an essential practice for any aspiring entrepreneur or established company seeking to thrive in the modern business world

What is a business credit score?

A strong business credit score is a powerful tool that can significantly impact the success and growth of a company. Similar to personal credit scores, business credit scores provide crucial insights into a business’s financial history, serving as a primary factor considered by lenders when evaluating the creditworthiness of a business.

Ranging from 0 to 100, a higher business credit score signifies a lower risk to lenders, making it easier for businesses to secure financing, negotiate favorable terms, and access various financial services. Whether it’s opening a business bank account, applying for a loan, or entering into contracts, a favorable business credit score enhances the likelihood of approval and can even result in more favorable interest rates.

Conversely, a poor business credit score, indicative of past missed payments or unsuccessful credit applications, can severely restrict access to financing options or result in exorbitant interest rates, hindering the growth and stability of a business.

By prioritising and maintaining a good business credit score, companies can unlock opportunities, strengthen their financial standing, and position themselves for long-term success in a competitive marketplace

How to check credit score for your business

It is crucial to recognize that a business’s creditworthiness is not solely determined by a single business credit score. Multiple credit reporting companies exist, each employing their own unique methods and scoring systems. Consequently, different lenders may utilize different credit reporting agencies when assessing an applicant’s creditworthiness. To obtain your business credit score, you must contact one of these business credit reporting companies.

Depending on the agency, they may provide your credit report via mail or grant you online access to your credit score through an account. In the United Kingdom, the three main credit referencing agencies (CRAs) are Experian, Equifax, and TransUnion.

For instance, Experian offers online access to your business credit score through a subscription model, allowing you to view your business credit report for a monthly fee of £24.99 (+VAT).

It is advisable for businesses to regularly monitor their credit scores from different agencies to gain a comprehensive understanding of their creditworthiness and maintain healthy financial standing

What do referencing agencies know about you?

CRAs diligently gather pertinent data from various sources including your application form, public records, and your affiliations with other companies in order to assess and determine your business credit score.

This can include:

• business name and address
• how many accounts you’ve had in the past six years, and when you opened them
• details of your regular payments – and if you paid on time
• some information from utility suppliers and mobile phone companies
• banks and credit card companies
• any people you’re ‘financially linked’ to – for example your company credit score may be impacted, for instance, if you have a business partner due to their credit history.

How do I find out what my business credit score is?

To find out your business credit score, you can follow these steps:

1. Contact credit reporting agencies: Get in touch with the leading credit reporting agencies, such as Experian, Equifax, and TransUnion, which provide business credit scores. Each agency may have its own scoring system, so it’s beneficial to check with multiple agencies to get a comprehensive view.
2. Request your credit report: Submit a request to the credit reporting agencies to obtain your business credit report. They may provide it via mail or offer online access to your credit score through a secure account.
3. Review your credit report: Once you receive your credit report, carefully review it for accuracy and any potential areas of improvement. Check for any errors, outdated information, or negative factors that could be impacting your credit score.
4. Monitor your credit regularly: Establish a habit of monitoring your business credit score regularly. This allows you to stay updated on changes, address any issues promptly, and maintain a healthy credit profile.

Remember, building and maintaining a strong business credit score is essential for accessing financing, securing favorable terms, and growing your business. By staying informed about your credit score, you can make informed decisions to strengthen your financial standing.

How to improve your credit score for your business

These are a few actions you can take to raise your credit score:

Verify your credit score: because inaccurate information on your credit report may provide the wrong impression to lenders and have an impact on it. Before you need to apply for credit, check your score to determine if there is anything you need to dispute or have rectified.

Open a business bank account: in the name of your company. To build your company credit score, you may also want to think about getting business credit such as an overdraft and a credit card, but it’s crucial to always make sure you’ll be able to make the repayments.

File on time: make sure you file returns on time and provide Companies House your accounting documents. Lenders may assume that you are having financial difficulties if you file late. To ensure that your reports are accurate and error-free, you might also think about having your accounts audited.

Pay your bills on time: to avoid damaging your credit rating, pay your bills and invoices on time and keep up with any credit repayments.

Close accounts you no longer need: your company credit score may suffer if it appears that you have a lot of credit available across several accounts.

Limit credit applications: avoid submitting numerous credit applications quickly. Applying to a different lender right away after being denied business finance is not recommended. Numerous credit applications on your record may give the impression that you are in need of financing urgently, which could harm your rating.

Keep information up to date: any time your company’s status, contact information, or location changes, make sure to let your contacts, suppliers, clients, and Companies House know. It doesn’t matter how slight the inaccuracy is if your correspondence and records indicate inconsistent facts.

Check your personal credit score too:finally, lenders may consider both your personal and company credit scores if you run a startup or a small business with less than three directors. In light of this, it’s a good idea to routinely check your scores and to make sure you’re doing everything you can to raise them both.

Read more: Does liquidation affect my credit score?

Frequently asked questions

Can you get a credit score for business?

Yes, you can get a credit score for business. A business credit score is the measure of a business's creditworthiness, which is made up from a number of factors to understand the financial position of a business and its level of financial risk. The score ranges from 0 to 100, with 0 representing a high risk and 100 representing a low risk.

Do small businesses have a credit score?

Yes small businesses have a credit score. While you may think credit scores are reserved for individuals, businesses also receive that ever important number. Similar to personal credit scores, business credit scores play a part in how lenders judge your business's eligibility for credit products, such as loans and credit cards.

Conclusion

In conclusion, business credit scores hold immense significance in today’s business landscape. These scores serve as vital indicators of a company’s creditworthiness, influencing its access to financing, negotiation power with suppliers, and overall financial reputation. A strong business credit score opens doors to various opportunities, including favorable loan terms, lower interest rates, and increased trust among potential partners and customers.

Conversely, a poor credit score can impede a company’s growth, limit financing options, and lead to higher costs. Therefore, it is crucial for businesses to actively monitor and manage their credit scores, ensuring accuracy, addressing any issues promptly, and implementing strategies to improve creditworthiness.

By prioritising a strong credit profile, businesses can pave the way for sustainable success, financial stability, and thriving in the competitive marketplace.