12 practical steps to improve your business credit score

A solid business credit report is essential for accessing the best financial products. Whether you’re starting out or aiming to improve your credit rating, here are 12 effective ways to raise your score.

What is a business credit score?

If you run a firm as a sole trader or a limited company, your firm has a business credit report that financial providers check to gauge how much of a risk you’d be as a potential client. By risk, these companies mean how likely it is that you wouldn’t repay any money you owe them on time.

Your business credit score draws together a range of information about you as a company owner. It includes:

• Company profile – What your company does, what sectors it serves, when it began trading, its registration number and contact details

• Director’s profile – The name, age, nationality and date of appointment of all directors

• Filed accounts – Including profit and loss accounts, turnover, cash flow and balance sheet

• Payment history – Revealing outgoings over the past 12 months, including any late payments or forfeits

• Public records – Including any county court judgments, legal notices and penalties issued against your firm
  

Who has a business credit score?

Anyone who runs a company has a business credit report from each of the three credit reference agencies (CRAs), Equifax, Experian and TransUnion. The longer you have been in business, the more detailed your report is – for good or bad.

If you’re just starting as a company owner, you won’t have a business credit report, or you’ll have a limited one at best. In this case, companies draw on your personal credit report to assess your risk level until there’s enough information to generate a business credit report and score.

How can you boost your credit score?

Different CRAs have different scales for their business credit scores. If the range is from 0 to 100, for instance, and you have a score of 80 or above, this is generally considered to be good , meaning your firm is classed as low risk. Even if you have reached this magic number, there’s no harm in looking to improve it further.

The motivation to enhance business credit scores is greater for companies that fall below 80. With a good score, companies can gain access to better financial products. They are also likely to attract those suppliers and clients who run credit checks on companies they consider working with.

Here are 12 ways you could boost your score:

• Get some cards – If you haven’t already got one, consider opening a business bank account and business credit card. Even if the overdraft or credit limit is low, using it wisely shows you’re trustworthy. Likewise, you might want to consider getting a business loan. Putting it to good use and repaying on time is likely to help your credit score

• Focus on cash flow – Always make sure you have enough money coming in to cover scheduled payments

• Moderate your credit use – Don’t be too ambitious with your expansion plans. Keep your credit utilisation – the proportion of available credit that you use – to less than 30%. Any more is a red flag to the CRAs and lenders

• Emergency funds – Keep some money aside for unexpected payments, or to cope if clients don’t pay on time

• Make a date – Always pay your tax on time and, if relevant, file your accounts with Companies House promptly. Schedule time to do this a few weeks in advance. Submitting late paperwork suggests you’re not on top of your finances

• File full accounts – Avoid submitting abridged accounts to HMRC or Companies House. Full accounts show you have nothing to hide

• Credit errors – Regularly check your credit report. If you spot a mistake, contact the relevant CRA and ask them to correct it

• Keep up to date – If any of your company details change, such as the firm’s registered name, address or partners, inform customers, suppliers and Companies House, if relevant

• Credit checks – Monitor your regular clients’ and suppliers’ credit reports. If their scores start to tumble, this could impact you, especially if they go bust before paying outstanding invoices or providing goods you’ve paid for

• Partners – Do your due diligence before shaking hands on a partnership. Check their credit score, especially before signing up for any joint accounts or other financial agreements that would link your finances and affect your credit report

• Eligibility checks – Making multiple business credit card or loan applications, following rejections, leaves a black mark on your credit file. Always run free eligibility checks first to see which cards or loans are likely to accept your application

• Shop around – Take time to consider what each account, credit card or business loan has to offer and the charges they make. The best option is the one for which you’d have the least trouble making repayments or clearing your overdraft