Guide
Ultimate guide to business credit scores
Read this guide to understand:
✅ Why your business credit score is important
✅ How you can check it
✅ Ways you can improve
Read this guide to understand:
✅ Why your business credit score is important
✅ How you can check it
✅ Ways you can improve
A business credit score is used to demonstrate how creditworthy a company is and the level of risk associated with lending to them. There are three main credit bureaus in the UK, Experian, Equifax and Dun and Bradstreet. Each of these credit bureaus will give your business a rating based on a number of factors, including how long your business has been trading, publicly available data, your business sector and whether you pay other companies on time.
Your business credit score will be important to your success for a number of reasons.
Credit bureaus use a variety of data available to them to assess a business and give them a corresponding score, or rating. Different credit bureaus will have different rating systems, for example Equifax rate businesses on a scale of 300 - 850, with 850 being the best score.
Experian, the credit bureau used by most lenders and suppliers, give businesses a numerical score on a scale of 0-100, as well as a letter rating (A-F). You can see in the diagram below how Experian business credit scores work:
Whether bills, loans, and other financial obligations are paid on time, late, or very late, is one of the most significant factors. Consistently paying invoices and debts on time can have a positive impact on the score.
A longer credit history tends to have a positive effect on a business's credit score. It provides a track record of the company's financial behaviour, which can help lenders and suppliers assess its creditworthiness.
Adverse information, like CCJs, or a Gazette notice, will have a significant negative impact. These public records indicate financial troubles and higher credit risk.
Credit bureaus use data points to assess a credit score. If there’s out of date information, or less information available, it can have a negative impact as credit bureaus cannot give an accurate rating.
The industry your business is in will have some impact on your score. Credit bureaus can use data on payment behaviour, or likelihood of failure, within a particular sector to provide context and make an estimate.
Annual financial statements are the most important piece of information for credit bureaus, providing rich insight into a business. Showing an improvement in your company’s position over time, or showing positive cash flow can have a positive impact. Filing accounts late can have a negative impact.
It’s possible to build a good business credit score and improve it over time by taking actions such as establishing a credit history and making on time payments.
You should also try to quickly resolve any negative marks on your credit profile, to ensure that your business credit score isn’t affected. For example, if you have a CCJ registered, it’s critical that you resolve it within 30 days, or it will have a negative impact on your credit score for up to 6 years. You can find out more about what to do if your business has a CCJ.
To fully understand which areas will need improvement for your business, you can Login to your Capitalise account and view the risk factors.
If you’re looking for a faster fix, you may want to consider getting your credit score professionally reviewed. Credit Bureaus report on a monthly basis and usually reassess credit scores when a significant event, such as filing a set of accounts, takes place. This means it can take a long time for your credit score to improve organically. Our Credit Review Service enables you to provide the most up to date information to Experian, so they can reassess your credit score. Taking only a couple of days, in 96% of cases this results in an improvement.
Top tip: Find out 10 ways to improve your business credit score.
You can check your business credit score for free with Capitalise for Business. When you sign up, you’ll be able to see your Experian credit score, your credit limit and any risks to your profile. You’ll also be able to receive instant alerts on any changes, so you can always be up to date. Find out more about the features that come with our plans.
When you check your credit score, your business credit report will show the following:
When you check your business credit score with Capitalise for Business, you’ll get a full business credit report which can even be downloaded as a pdf for ease of use. This credit report will have all the information about your business’ financial health in one easy to read view, which can prove useful if you’re applying for a business loan, or want to negotiate better deals with your suppliers.
As well as your business credit score, payment history and public records, your full credit report will also include the following information:
This means your pdf credit report will contain enough information to be used to tender for new contracts, saving you time with everything you need readily available.
The highest Experian business credit score is 100/100, this is an A rating. Businesses with the highest credit score can expect to access the cheapest interest rates and favourable terms from suppliers.
The lowest business credit score is 0/100, this is a G rating. Businesses with the lowest credit score may struggle to get funding, might not be offered credit from suppliers and could face difficulty when looking for new work.
Any limited company will be awarded a business credit score once they’re set up. Once a company is established, it can take a couple of years to build a good business credit score. This is because credit bureaus will use company accounts to give an accurate credit score, which will require at least a year of trading in order for one set to be filed.
You can check a company’s credit score from your Capitalise account. This will allow you to detect any risks to your business and better protect your cash flow. Just sign up, to get started credit checking up to 100 companies.
If you’re not a sole trader, your personal credit score and your business credit score will be separate. As long as you’re not using your personal accounts for your business, your personal credit score will not affect your business credit score.
You’ll likely see an improvement in your business credit score after filing your second set of accounts. This is because there is a reduced risk of failure once your company is at least 2 years old, so you will be seen as a lower risk business. With your second set of accounts, credit bureaus will also have more information available to assess your credit score, often resulting in an improvement.
