The ultimate guide to business credit scores

What is a business credit score?

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.

Why does your business credit score matter?

Your business credit score will be important to your success for a number of reasons.

Firstly, your credit score will directly impact whether you can get a business loan. Many business lenders will use credit scores as their first point of assessment when receiving a loan application. So if a business’ credit score is below their minimum threshold (generally sitting at 45/100, or a ‘D’ rating, for Experian business credit scores) they won’t be able to access funding. While some lenders will consider loans for businesses with bad credit , you’ll likely be subject to high interest rates.
If you work with suppliers, your business credit score will affect whether you can access goods or services on credit and favourable payment terms. Companies with good business credit scores are seen as reliable partners so suppliers will want to continue working with them and offer trade credit. This means your credit score could directly impact your cash flow, being the difference between you being able to pay later and access discounts, or having to pay for materials upfront.
Other businesses can run a company credit check on you, so your credit score will be important if you operate business to business, or tender for work. If you want to enter into a new partnership with a company, they will likely check your credit score to get an indication of whether you’re in a stable position, pay on time and if you will be a reliable partner. If you have negative information on your credit profile, such as a CCJ, it could stop you from winning new work.

How does a business credit score work?

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:

What affects a business credit score?

Payment history
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.
Length of credit history
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.
Public records
Adverse information, like CCJs, or a Gazette notice, will have a significant negative impact. These public records indicate financial troubles and higher credit risk.
Level of company information available
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.
Industry-specific data
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.
Financial statements
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.

Can your credit score improve?

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.

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.

How can you check 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.

What does your business credit report show?

When you check your credit score, your business credit report will show the following:

Your exact numerical credit score and letter rating
The credit risk factors impacting your score
Any public records, such as CCJs, registered against your business
Historical payment performance data, showing whether you pay late, or on time
Cash and capital position, showing how you manage your business bank accounts and borrowing
Annual accounts, including Balance Sheet, Profit & Loss statement (if available) and financial analysis ratios

What can you use your business credit report for?

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:

Balance Sheet (expanding up to 3 years)
Profit & Loss statement (if available)
Financial analysis ratios
Shareholder details
Allotted share capital for shareholders
Details of the group structure with parent companies and subsidiaries
Existing mortgages
Charges against any assets

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.