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Business credit score

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 4, 2023

Fact Checked By:
David Nicholson - Finance Editor

Your guide to business credit scores, how they work and how they can affect you

Business credit scores look at a company’s financial health and assign a credit score that reflects its financial condition.

A good business credit score will help you get credit funding or raise money.

Continue reading to learn how credit scores can impact your business credit and what you can do to improve your business credit report.

Many businesses need credit to access loans, overdrafts, and other borrowings; however, their business credit scores are a significant factor in their ability to get credit.

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What is a business credit score?

The business credit score measures the financial health of a business.

It assigns a score to reflect the company’s financial health, much like a credit score shows your personal finances.

A credit reporting agency calculates a company’s credit score by looking at factors such as overall borrowings, financial history and how long the company has traded to arrive at a number that reflects its creditworthiness.

Lenders determine if a company can take on more debt while not putting its financial stability at stake.

Refusal to lend credit can affect a company’s ability to borrow money, such as small business loans that may be required.

You can take steps to improve your credit score, which will ensure that you are seen by lenders in the best light possible when applying for a loan or any other type of business finance.

How do you check your credit score for business?

Lenders can use several credit rating agencies to calculate a business credit score rather than just one for each company.

Experian and Equifax are the leading credit rating agencies for UK businesses and each has its own method of calculating and displaying scores.

Different lenders will use different credit agencies, so comparing your credit scores across multiple companies is a good idea. Experian uses a numerical scale to indicate creditworthiness.

Businesses are given a credit rating of 0 to 100, with 100 being the lowest risk. Its business score indicates the likelihood of a company becoming insolvent within the next 12 months. A score of zero is very likely, while 100 is very unlikely.

Credit rating agencies consider a company more financially stable if it has a higher business score. If you have a poor credit score, you may have to get a business loan for bad credit, which comes with higher interest rates and security.

Access other tools that can help you reveal the main factors that influence your score and alert you to any changes. Also, show lenders what you see when they evaluate your company for a loan application.

What you will need to sign up

  • To be the owner of the company that you are researching.
  • Personal details such as a home address, telephone number, email, and date of birth.
  • A valid debit or credit card.

Free credit score checking

You may need to sign up for a monthly fee to access your score and other information about your business. However, many companies offer a free trial before you sign up for a monthly payment.

What will a bad credit score do to my business?

It might be difficult to get finance for your business if your credit score is low. Applications could be rejected or offered higher interest rates.

You may be eligible for more financial products and offer higher interest rates if you have good credit.

A good credit score can help with lending terms, but it’s not just about that. Business credit scores are not like personal credit scores. Everyone can see them, including potential business partners, customers, suppliers, and even potential customers.

Strong credit scores can help companies get higher credit limits, lower premiums, and better terms for leasing essential equipment like machinery or property.

If you get any invoice finance facilities or other cash flow finance lending, such as a merchant cash advance these will be dictated by your business credit score.

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How do I improve my credit score for business?

It could be challenging to borrow money if your credit score is low. However, it’s possible to improve your credit score.

These are the best ways to improve your score.

  • Verify that the information in your file is correct. This will ensure that your company is accurately represented.
  • Keep an eye on your score. This will allow you to see any changes and ensure you aren’t adversely affected by incorrect information being added to your file.
  • Invoices and bills paid on time – If you make late or missed payments to your account, it will affect your credit score.
  • Get a deal with CCJs right away – If you pay all of your bills on time, you can avoid any County Court Judgments that could negatively affect your credit score.
  • File accounts at the right time – Late filing of accounts to Companies House will be flagged as a problem that could affect your credit rating.
  • Don’t apply for too much credit – Multiple applications within a short time frame could indicate to potential lenders that you are in financial trouble.
  • Manage your finances responsibly – Having some debt or a credit facility is suitable for credit ratings. Credit rating agencies can’t assess how well you manage credit and debt without it.
  • Check the credit scores of your suppliers – You can check your partners’ and suppliers’ credit scores to determine if they’re in good financial health.
  • Manage personal finances responsibly – While personal and business credit scores are distinct, some lenders will consider both.

You can find more information in our guide below about how to improve your credit score for the business.

How long does it take to improve my credit score for business?

Although you might be tempted to fix your poor business credit score immediately, credit rating agencies take time to see the results of your business credit actions.

You should expect a delay of several months before you start improving your credit management (e.g. paying off a business credit card), which will affect your company credit score.

Do business credit cards help build your credit file?

Many businesses are told to get credit to repair their credit file, but lending only a tiny proportion of your profit is important.

This can affect affordability so think about alternatives to credit cards if you are looking to lend a high percentage of your profit.

What are the steps to get a loan for bad credit?

It is more difficult to secure business financing if your credit score is poor than if you have good credit.

It is possible to get business financing from business loan lenders who specialise in bad credit business loans for impaired credit customers.

It could be worth looking into a personal loan, so our guide on business loans vs personal loans can help you decide.

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