9 ways to improve your business credit score

Lenders, suppliers and other creditors use your business credit score to assess whether you'll pay bills on time.

Your business credit score is more than a number.

In fact, it can play a role in your business' overall success.

This is because your credit score helps lenders, suppliers and other creditors to quickly evaluate whether your business will pay its bills on time.

What is a business credit score?

Credit reference agencies (CRAs) collect and maintain information on individuals' and businesses' credit behaviour in the UK.

These CRAs record five different elements of your business's credit profile.

1. Your payment history
2. Your total amount of debt
3. When you held credit, and for how long
4. The type of finance you have
5. Any applications for finance you've made recently

From a variety of sources connected to the elements above, the CRAs then derive a credit score for your business.

For example, with Experian, the score ranges from 0 to 100.

Zero represents a high risk, while a score of 100 indicates a business that presents a very low financial risk.

Consequently, your business credit score is the measure of your business' creditworthiness.

That itself is made up of a number of factors used to understand the financial position of your business and its level of financial risk.

Why is a credit score important?

Whenever you apply to a bank for finance, the bank will try and build up a picture of your personal and business circumstances, combined with your financial history.

This is a crucial part of assessing your business, and, as part of the process, the bank will often use data the credit reference agencies hold about you.

Credit reference information is also used by lenders other than banks, including those that offer trade credit.

How can I improve my credit score?

You should appreciate that credit scores are complex statistical models for predicting credit risk.

As such, there is no guaranteed way to improve your business credit score.

However, there are some steps you can take (this is not an exhaustive list):

1. If you're a limited company, make sure you file full rather than abbreviated accounts at Companies House.
2. As with your personal accounts, your history of paying bills on time can affect your business credit score. Avoid any negative repercussions by getting into the habit of being on time with your bill payments.
3. Always have enough money in your account, or as approved overdraft limit, to cover any payments you're due to make (for example, cheques, standing orders, direct debits, debit card payments and online payments).
4. Make sure your personal finances are healthy. If you're a start-up with little financial information available, lenders may use data from your personal accounts to calculate your business credit score.
5. Only apply for credit when you absolutely need to. It can be tempting to explore the finance options available for your business, but making too many applications in a short time will result in 'multiple searches' (also known as 'footprints') that could suggest you're struggling to secure funding. This can also trigger a credit search on your business, which is noted on your credit record and can affect your credit score. When enquiring about finance, ask for a quote rather than submit an application.
6. Collaborate with your suppliers. If you have a good working relationship, ask them to provide feedback and share payment record data with credit reference agencies.
7. If any of your information (such as your registered office address) changes, notify suppliers and customers, as well as organisations like Companies House, as promptly as you can.
8. Demonstrate your turnover by using your business bank account regularly and over a long period. (For example, don't pay business receipts into your personal bank account.)
9. It may make sense to keep track of the business credit score of your partners, important suppliers and customers, as them falling into financial difficulty could affect your circumstances too.

Also note that a county court judgment (CCJ) or High Court judgment is likely to harm your business credit rating, as well as your personal one. Learn more at GOV.UK.