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Business credit score

Myles

Author: Myles Robinson - Advisor

Posted: May 31, 2022

Your Guide to Business Credit Scores

Business credit scores look at the financial health of a company 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 major factor in their ability to get credit.

What’s 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 in the same way as a personal credit score shows your personal finances.

A credit reporting agency calculates a company’s credit score by looking at various factors such as overall borrowings, financial history and how long the company has traded to arrive at a number that reflects its creditworthiness. This is how lenders can 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. This will impact its ability to grow. There are steps that you can take to improve your credit score. This 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 main credit rating agencies for UK businesses. Creditsafe, Creditsafe, Dun & Bradstreet, and Creditsafe are also available.

Each has its own method of calculating and displaying scores.

Different credit agencies will be used by different lenders, so it is a good idea to compare your credit scores across multiple companies. Experian uses a numerical scale to indicate creditworthiness.

Businesses are given a credit rating of 0 to 100. 100 is the lowest risk. Creditsafe uses a similar rating system. Its business score indicates the likelihood that a company will become 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.

You should also display your business credit score. 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.

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

To access your score and other information about your business, you may need to sign up for a monthly fee. 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. If you have good credit, you may be eligible for more financial products and offer higher interest rates.

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. They can be seen by everyone, 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.

How do I improve my credit score for business?

It could be difficult for you 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 timeLate 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 good 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 immediately fix your poor business credit score, 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 to improve your credit management (e.g. paying off a business card) and it will have an effect on your company credit score.

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, but not impossible.

It is possible to get business financing from business loan lenders who specialize in “bad credit business loans”.

These loans allow those with bad credit ratings, such as business owners, to obtain business finance.

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