6 tips to improve your company’s business credit rating

Three out of five businesses never check their credit rating. Yet a poor rating can affect your business’s ability to borrow just as much as a personal credit score. Simon Willmett shares 6 tips to improve your business credit rating

Although most people are aware that credit reference agencies actively collect data on all individuals, many business owners are unaware that these same agencies also check the creditworthiness of their company. But realising that your business has its own credit rating means that you are already ahead of many UK SMEs.

Establishing good business credit is vital if your SME is to thrive. Not only does it impact your ability to get the best deals from suppliers, but it can also hinder the chances of securing the external funding your business needs to achieve its ambitions. However, with an ever-growing to-do list, it’s all too easy for business leaders to forget about the importance of business credit ratings and their impact.

>See also: Do business credit scores matter?

Similarly, putting an emphasis on good financial responsibility is crucial for businesses keen to establish a positive reputation among its customers, lenders and suppliers.

The good news, however, is that improving your business’s credit rating doesn’t need to be difficult and there are some simple measures you can take:

#1 – Check your business credit score regularly

Research by Experian found that nearly three in five SMEs have never checked their commercial credit score. And, of those who have checked their score, over half (56pc) failed to do so in the last six months. What’s more worrying is that only 13pc could correctly identify all the key factors that influence the credit rating of a business.

While it may seem surprising that so many businesses do not check their credit score regularly – or at all – it isn’t when you consider that the majority simply do not understand what their commercial credit score means.

Viewing and accessing your business’s credit score will typically require a paid service from a business credit file company. You can purchase one-off reports that will give you surface level information on the score of your SME and these company credit checks are recommended, regardless of whether you intend to apply for finance. Being aware of your credit score and checking it regularly is an important aspect of running a business that is in a good financial position.

>See also: Improving your credit status

#2 – Invest in insight

There are a number of tools available that businesses can use in order to better understand their current financial situation. By investing in this kind of data, you will be able to stay one step ahead and will also have the opportunity to address negative changes to your credit rating before they become a bigger issue.

Tools such as My Business Profile enable you to check and improve your business credit score by sending automatic alerts whenever there are significant changes to your company credit rating. By giving yourself the chance to be reactive, you will have a better chance of reducing the damage to your commercial credit score in the long run.

This tool is particularly useful for those small businesses looking to access external funding as it can show exactly what lenders see when making credit decisions about your company. As a result, it can enable business owners to address any negatives on reports so that your business loan application is more likely to get approved.

#3 – Always pay on time

Late payments continue to be an industry-wide issue, with recent research from BACS revealing that 43pc of SMEs experienced late payments last year. It is estimated that late payments suffered by UK businesses have cost SMEs a staggering £13 billion in total and this figure shows no signs of decreasing in the near future.

When one supplier pays late, this consequently has a knock-on effect for the rest of the supply chain. As such, failing to pay on time could in fact end up harming your business in the long run.

When it comes to your business credit score, it’s vital to always pay on time, as any late payments will have a negative impact on your score and it can take a long time to recover from this if you repeatedly make the same mistake.

Credit reference agencies will supply data on your business that includes all of its financial history. This includes any information about default payments as well as any outstanding County Court Judgements (CCJs), a court order which can be issued against a borrower’s name if they fail to make repayments on a debt. Just one default will negatively impact your commercial score and this information will remain on your company’s file for a minimum of six years.

#4 – Share information with relevant parties

It’s important to ensure that you are proactive and actively share information with credit reference agencies. A big part of what they do as credit checkers is to validate all of the information on your business record, so verifying that what is on your report is accurate regularly is essential.

#5 – Do your due diligence

Your company’s business credit score is not just reliant on your own success but also that of those you work with. Therefore, it is a good idea to monitor the credit positions of both your suppliers and customers; a problem that starts internally could end up harming your own credit score, for example, if a business you rely on goes into administration.

#6 – Take time to educate yourself

Education is crucial when it comes to credit scores. A lot of company owners and business decision makers have no idea how their commercial credit score is calculated. It’s important to make sure you’ve checked your business credit score recently and to know how credit reference agencies arrive at that figure. There are various factors that all contribute to this, including:

  • Any outstanding balances
  • The number of trade experiences your business has had
  • The typical payment habits of your business
  • How well your business utilises credit
  • Trends and patterns formed over time
  • Information on County Court Judgments

While it may not seem top of the priority list, ensuring that your business has a good credit rating is paramount to the success of your business and will put you in good stead to secure additional funding in the future.

Simon Willmett is finance director of Nucleus Commercial Finance

Further reading

Why scale ups have funding concerns – new report


Simon Willmett

Simon Willmett is finance director of Nucleus Commercial Finance.

Related Topics

Credit Rating