Build your business credit score

A credit score is a tool used by lenders to work out whether you qualify for credit. The score represents the credit history of your business, and helps to show how you’ll manage repayments. The score usually ranges from 0 to 100, and you should aim to have as high a value as possible. This tells lenders that the risk is lower when offering you credit. 

Different factors affect how your credit score is calculated, including

• Whether your business is registered with Companies House or not
• Your credit providers 
• Information the Registry Trust holds on you, for example any County Court Judgements (CCJs)
• Your credit history

It’s important to note that the factors affecting your credit score vary depending on which credit reporting agency (CRA) or lender you use. This means that their calculations will vary too, so you might get a different credit score from each CRA. 

A credit score helps lenders decide whether to offer you credit, how much and at what rate. This information means they’re able to make an informed decision when lending, so they can reduce the risk to themselves. 

Your credit score serves other important functions, too, because it can be used by your creditors and suppliers when your business is competing for tenders or when negotiating contracts. You’ll also undergo a credit check if you open a new account with a bank or other lender. 

To build an accurate picture of your company finances, lenders take a detailed look at your business credit file. One of the first things they’ll want to know is whether you have any CCJs against you. If you’ve applied for credit in the past, they’ll look at whether you followed the terms and conditions of your lending agreement. 

Lenders will also look at

• The ownership details for the business 
• The company accounts
• Any trade credit secured  
• How many applications for finance you’ve made in the past
• Your existing credit  

Where there is little or no history of borrowing, your company might find it difficult to get credit. That’s because commercial lenders use these records to see how your business will perform, and whether you’ll meet the terms of lending set out in the contract. 

We know that a healthy credit score benefits your business, but how can you achieve it? Here are some tips for you to consider. 

1. Pay promptly
   Try to pay your invoices on time wherever possible. Payment terms are a form of credit, so your credit rating will be negatively affected if you don’t do this.
   
   
2. File on time
   It’s important to submit your accounts and returns by the deadline. If you’re late in filing these, it can be a sign to lenders that you’re facing financial problems.
   
   
3. Avoid County Court Judgments
   No one wants to have a CCJ made against them, but if they do, it will be recorded on their credit report. If you get one, it’s in your best interest to pay it on time.
   
   
4. Limit credit applications
   Try not to make too many credit applications against your business in a short period of time, as this suggests to lenders that you’re struggling to secure funding.
   
   
5. Ask for a quote
   If you need to apply for business finance, ask for a ‘quotation’ instead. This is a simple solution that helps to limit the number of credit applications you make.
   
   
6. Stay up to date
   Keep your customers, suppliers, Companies House and business directories updated with any changes to your location or business status. Outdated or inconsistent information makes your business seem unreliable.
   
   
7. Don’t forget partners
   Keep track of the credit position of your customers and suppliers, as this can also affect you. Using this information, you’ll be able to limit the damage to your business if one of them goes into administration. 

Yes, the two scores are separate and they measure different things. Your personal credit score measures your ability to pay back a debt, and a business credit score looks at the ability of your company to do so. 

In the UK, you’ll have two separate credit files – one for you as a consumer, and another for your company. However, if you’re a start-up or a small business with less than three directors, lenders might use tools that combine both your personal and business credit score. They’ll do this where a company has little or no financial history to check against, so personal data is used to build an accurate picture. With this in mind, it’s important for business owners to take care of both their personal and business credit scores.  

In some instances, lenders will check your personal credit file when you apply for a business loan or credit card. They’ll do this if they haven’t been able to get enough information from your business credit score to make a lending decision. They’ll either carry out a ‘soft’ or ‘hard’ credit search. A soft search is the better alternative, as it shouldn’t affect your credit score. If a hard search is carried out, and your application for a business loan or credit card is refused, this can affect your personal credit score. The impact is temporary, but it’ll reduce your personal credit score by between one and five credit points. 

If you’re worried about a poor personal credit score affecting your ability to get business credit, have a chat with your lender before you apply.

Commercial Credit Data Sharing (CCDS) is a government initiative that requires nine major banking institutions to share financial information about their SME customers with selected CRAs. These SMEs must have a turnover of less than £25m. This includes data on business current accounts, loans (including mortgages) and credit cards. 

You can view or request your company credit file from various CRAs including Experian, Equifax, Credit safe and Dunn & Bradstreet. Not all of these CRAs offer an online service – and there may be a charge.