Business Credit Score How To Improve It

A business needs a positive credit score in order for them to successfully deal with suppliers, vendors, lenders and potential business partners. This means for many businesses in the UK, they need to work on improving their credit score.

If your business has struggled to secure new finance or been refused credit by a supplier, this may have had an impact on your future plans for your growth. Can relying on your personal finances really be the answer?

Having full visibility of your business credit profile, enabling you to understand what’s affecting your company credit score, this will enable you to understand what is preventing you from being able to obtain that all important business finance or supplier.

What is a business credit score?

A business credit score is a scoring system used to evaluate the creditworthiness of a business. The score is used by lenders to determine whether to extend credit to a business and at what interest rate.

A high business credit score indicates that a business is a low-risk borrower and is more likely to repay its debts on time. A low business credit score, on the other hand, indicates that a business is a high-risk borrower and is more likely to default on its debts.

Lenders will often use a business’s credit score as one of several factors in making lending decisions. Other factors that may be considered include the business’s ability to repay its debts, the collateral available to secure the loan, and the terms of the loan.

Businesses with higher credit scores are typically able to obtain better terms on their loans, including lower interest rates and longer repayment periods. There has arguably never been a more important time than now to have a strong business credit score.

The global pandemic has brought with it many trials and tribulations, sending businesses to their knees and forcing a lot of permanent closures. One saving grace for business owners has been the funding they’ve been able to apply for and receive this year, in order to keep their respective ventures afloat during these difficult times.

Though, having a good business credit score certainly helps in getting your hands on the funding that may help your business to survive, so we want to tell you how to make sure yours never falters, even during a global pandemic and protect your business.

Why is my credit score important?

Business credit is important for a number of reasons. First, it is a good indicator of your business’s financial health. Lenders use credit scores to determine whether or not you are a good candidate for a loan. If your business has a good credit score, lenders will be more likely to approve your loan. Second, business credit can help you get lower interest rates on loans.

This is because lenders view businesses with good credit scores as being less risky and therefore more likely to repay their loans on time. Finally, having a good business credit score can help you win new customers and clients. Many businesses check the credit scores of potential partners before doing business with them. If your business has a good credit score, you will be more likely to win new clients and partners.

In summary, there are many reasons why your business credit score is important. A good credit score can help you get better terms on loans, win new clients, and ensure the financial health of your business.

What affects my business credit score, and how can I improve it?

Just as your personal credit score affects your ability to get a loan or credit card, your business credit score affects your company’s ability to borrow money and obtain lines of credit. But what exactly is a business credit score, and how is it determined?

Businesses have credit scores just like individuals do. Your business credit score is a three-digit number that lenders use to assess your creditworthiness. It takes into account factors such as your payment history, the types of credit you have used, how much debt you have, and the length of your credit history. Just as with personal credit scores, a higher business credit score indicates that you’re a lower-risk borrower, and vice versa.

There are a few different ways to improve your business credit score. One is to make sure that you pay all of your bills on time; another is to use a mix of different types of credit, such as revolving lines of credit and installment loans; and finally, you can try to keep your balances low relative to your available credit limits. By taking these steps, you can improve your chances of getting approved for loans and lines of credit at favorable terms in the future.

Ways to improve your credit score?

There are a few key things you can do to improve your business credit score. One is to make sure you keep up with your payments – whether that’s paying your bills on time, or paying off any outstanding debt you may have. Another is to maintain a good credit utilization ratio – that is, don’t max out your credit cards or lines of credit, and try to keep your balances below 50% of your available credit.

Finally, it’s also important to have a diverse mix of credit accounts open and in good standing; this shows lenders that you’re a responsible borrower and helps improve your business credit score. By following these simple tips, you can help improve your business credit score and make yourself a more attractive borrower to lenders.

• Audit your credit report

By purchasing credit reports you can regularly review your credit rating and therefore tackle any problems you my face as soon as possible.

Credit reference agencies collect credit reports, and those reports are based on data available in the public domain about your business. By analysing this data, the decision can be made on how likely your business is to repay a loan on time. So having a good credit score is clearly important for a myriad of reasons.

If you’re analysing these reports yourself, it is imperative that you take notice of the items in the ‘negative’ category and look out for signs of business fraud, outdated information or identity theft. If this information is incorrect and you leave it unchanged it can affect your credit score in a bad way that is underserving. Maintaining these reports with the right information will prove to be highly beneficial to your business venture.

• Think carefully about when you apply for credit

Before firing away and applying for credit left, right and centre, you should be aware that every single credit application you file will be added to your credit report, even if these applications are unsuccessful. This means that every time you have a loan application rejected, it could be damaging to your current credit score. Before continuously applying for credit, you should be aware that lenders will definitely be put off by businesses that appear to almost solely rely on credit alone.

Having a positive cash flow will help to build up your business’ credit rating because credit agencies will take into account any difference between your current liabilities and assets. Lenders will view you as a much more creditworthy company if you have a strong level of incoming cashflow.

• Focus on paying creditors on time or early

You can prove that you’re both a reliable and sensible borrower by paying your accounts on time or even early whenever possible. There are key differences to each credit companies research policy, but they’ll all consider your financial history as a bare minimum when analysing your application. This means the quicker you can get into the habit of creating a positive credit history for yourself and keep it consistently good, the better the odds will stack in your favour.

You should note that credit utilisation is something which is taken into account whenever someone applies for credit. Because of this, you should avoid maxing your card to the limit or using more than 70% of the funds available in your account.

You should aim to always pay your suppliers on time because credit scoring agencies will often compensate for a dearth of information by contacting your them. Not only is this advantageous for conserving good business relationships, but it’ll also guarantee that you get a good reference when you go searching for finance, which is something that can be crucial to any business.

• Keep your credit applications to a minimum

When you submit any credit application, you run the risk of the company running a credit check on your business. Every time a credit check is processed, it is filed and kept on your business account but no at companies house. If many credit checks are carried out in a short space of time, this can look as though you’re struggling to secure finance – which is not a good indication of suitability for potential lenders.

I’m looking for finance. What are my options if my credit score is poor?

Owning a business in the troublesome world of the global pandemic makes it exceedingly difficult to change a bad business credit score to a positive one. If you’re continuing to struggle making any improvement to your credit score as a whole, you can choose to opt for unsecured business financing methods, this type of borrowing may cost a little bit more due to having a poor credit history.

Conclusion

One of the most important things for a small business owner to remember is to keep an eye on their business credit score. A business credit score is like a report card for your company and is used by lenders, suppliers, and partners to determine your creditworthiness. Just like personal credit scores, business credit scores can range from poor to excellent, and having a good score can mean the difference between getting approved for a loan or being denied.

Additionally, a good business credit score can help you get better terms on loans, lines of credit, and insurance. Therefore, it is crucial to stay on top of your business credit score and to make conscious efforts to maintain or improve it.

There are many ways to do this, such as paying bills on time, keeping a good mix of different types of credit accounts, and maintaining a healthy balance in those accounts. By following these steps, you can help ensure that your business has the financial stability it needs to succeed.