What is a business credit score?
You’re probably aware of your personal credit score. But did you know you have a business credit score too?
If not, don’t worry. You’re certainly not alone.
Experian is one of a number of credit reference agencies that collect your credit information.
It estimates that almost two-thirds of business owners have never checked their credit score, while nearly 90% say they don’t know what goes into it.
In this article, we look at:
- Why your business credit score is important
- What affects it
- How you can improve it
- What finance options may be available to you if your score is lower than you’d like
How to run a credit check on a company
The most straightforward and efficient method to investigate the credit worthiness of a business is to obtain an official business credit report from a credit reporting agency.
Credit reporting agencies that operate in the UK include Experian, Creditsafe, Credit Passport, and Dun & Bradstreet.
Each agency uses its own specific criteria when calculating the credit score of a business but all draw from common factors to assess a company’s credit worthiness.
Many of these companies offer a free trial service but operate a subscription model for regular users.
What does a business credit check show?
Lenders, landlords, and suppliers use your credit check to determine how financially reliable your business is.
They'll take a close look at things like how promptly your business has made payments in the past, any outstanding debt it might have, and how it's been using its available credit.
A business credit report generally provides the following details:
- Official Business Name and Communication Information: this includes the registered name of the entity and its primary contact details.
- Credit Score and Record: this is a numerical representation of your business's creditworthiness, derived from its financial history.
- Payment Habits and History: this section offers insights into the past and present payment behaviours of your business, indicating your reliability in fulfilling financial obligations.
- Public Records and Liens: this data reveals any legal claims or encumbrances on your business's assets, providing a clearer picture of its financial standing.
- Business Financials: this incorporates detailed information about the company's revenue, expenses, and overall financial status.
- Trade References and Suppliers: this information showcases the company's operational reliability through its relationships with trade partners and suppliers.
- Industry Information and Risk Assessment: this segment outlines the risk factors associated with the company's industry and offers an analysis of the business's potential risks.
Ways to improve your credit score
I’m looking for finance. What are my options if my credit score is poor?
As well as reviewing factors that may affect your credit rating, there are further options you might consider if your credit score is poor and you’re looking for finance to grow your business.
Again, these are suggestions only and do not guarantee that you’ll obtain finance as a result.
If you have a poor credit score
With so much to keep you busy when running a small company, staying on top of your business credit score may never have seemed a high priority.
But it’s a key component of your business’ DNA.
Being aware of your rating, and making conscious efforts to maintain or change it, could be crucial in ensuring your business stays one step ahead of the game.
Making business finance work for you
Starting a business doesn’t come with a set of instructions.
We know that understanding the many different types of financial product in the marketplace can be difficult.
Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.