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What's a good business credit score

Understanding the impact of your business credit score

Capitalise Dec 15, 2022

Running your own small business means wearing a lot of different hats. You have to define the strategic course of the company. Deal with clients and suppliers. Manage your staff. And keep on top of your finances. But is monitoring your credit score also on your to-do list?

Knowing your business credit score helps you keep your business financially healthy. We explain how your credit score is rated and what you can do to improve this score.

What’s a business credit score?

A business credit score measures the risk of lending to you. It’s a rating that’s generated by the major credit reference agencies, like Experian or Equifax.

The credit score is used by banks, creditors, suppliers and customers so they can make a well-informed decision about whether to trade with you. 

 

Do businesses have credit scores?

Yes! If you run a limited business, your company will have a credit score separate to  your personal one. Although they work in much the same way. However, if you’ve just registered your company, you may not see your business credit score straight away.

Your business credit score is a measure of how creditworthy your business is. It’s one thing banks, lenders and suppliers use to make decisions about lending, investments or term agreements. 

If you’re a sole trader you will have a business credit score but this will be closely ties to your personal credit score to assess your creditworthiness. 

Action: Sign-up for free and check your business credit score

 

What’s a GOOD business credit score?

Different agencies use their own scales. For Experian, business credit scores range from 0 to 100. The higher the credit score, the better your financial position as a business is seen to be.

For example, a score of

  • 81 to 90 = low risk.
  • 51 to 80 = below average risk
  • 2 to 15 = maximum risk 

Take a look at the Commercial Delphi Score table to see the full list of credit ratings.

Which factors influence your credit score?

Your company’s credit score provides a snapshot of your business’ financial health. It’s influenced by a number of factors. Your industry type (listed on Companies House as a ‘SIC’ code) can influence your score. Your past payment performance can have an impact. Having active County Court Judgements (CCJs), filing your accounts late, or having high levels of debt can all have an effect too. It’s complex, but there are ways to understand these impacts.

Action: See which factors are influencing your business credit score

 

How does a business credit score work?

Business credit scores are determined by a variety of different factors that show banks, lenders, suppliers and other businesses how your business is performing. 

Examples include: 

  • Business payment history
  • Company age and size
  • Filing of accounts
  • Debt and debt usage
  • Risk of failure in your industry 
  • Any County Court Judgements (CCJs) registered against your business 
  • Any signs of business insolvencies

Your score shows banks and lenders how much of a risk it would be to lend your business money.  Credit agencies each have their own scale for calculating your credit score. Our credit agency partner, Experian, uses the Commercial Delphi Score with scores that range from 0 (the highest risk) to 100 (the lowest risk). 

Action: Sign-up to check your business credit profile

 

How can I check my businesses’ credit score?

You can check your business credit score right now by signing up to Capitalise for Business. If you’re already signed up, you can check your score at any time by simply logging in. We work with Experian, one of the UKs leading credit bureaus, to show you the same score and data used by banks and lenders. 

 

How can I build my business credit score?

Building up your business credit score is all about adopting best practices when it comes to your business finances. There’s different strategies you can start focusing on and implementing to increase your score over time. Including:

  • Filing your accounts on time and in a consistent pattern
  • Paying your bills and suppliers on time 
  • Minimising your existing lines of credit or consolidating them into one manageable loan from a single lender
  • Maintaining good account performance by removing dormant or low activity bank accounts
  • Making sure you have no risks of insolvency in your business or registered County Court Judgements 

The first step is to know exactly what your business credit score is and what factors are affecting it. If you are already signed up to Capitalise for Business, log in to check your credit profile

Action: Check your business credit score.

 

Understanding the impact of your business credit score

As a small business, there will be times when you need to borrow money, or agree credit terms with your suppliers. You may want to take out a business loan, or negotiate a bank overdraft. Or you might want to secure improved credit with a supplier. But to do this, you need to be creditworthy – so lenders and suppliers know you can repay them.

 

The positive benefits of knowing your credit score

Using credit tools, it's possible to view the credit history of your business. This means that potential suppliers, business partners, or even competitors, can see your credit score. Knowing your credit score can influence whether customers and suppliers want to work with you. So, monitoring your business credit score – and being proactive about improving it – can help you improve your access to funding and trade credit. 

 

How to improve your business credit score

The exact steps you need to take to improve your business credit score will be specific to your business and the factors that are having a negative impact.

But, if you looked at your score recently and it looked low, there are strategies you can do today to start improving your score. First, you’ll want to check you’ve got no long-standing overdue payments or County Court Judgements (CCJs) against your business. Then, check your payment performance, and whether you have any overdue payments. 

You may want to consider looking into our Credit Review Service, powered by Experian. You’ll get your credit score reviewed by one of the UKs leading credit bureaus, and their experts to check if it's correct and see if it can be improved. Find out more about this service.

Read our recent article to find out how you can improve your credit score. Or, speak to our team of funding specialists to get some advice. 

 

The value of improving your credit score for your business

By improving your business credit score, you will have better access to funding, lower interest rates on loans you take out, and improved terms on your trade credit. 

With better funding and more money in the business, you’re free to drive your future growth – and that’s good news for any business owner.  

 

Check your business credit score today.

 

Original post 24.01.2022

Updated 18.07.2023

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