How to improve your business credit score

Sixty per cent of UK small businesses struggle to access vital services due to poor credit ratings.

More than half of small businesses (60 per cent) are struggling to access goods and services for their business due to poor credit score, according to research by one of the UK’s fastest growing energy provider, Utilita.

In a national survey of SME’s (small to medium enterprises), business owners said the perception that small and micro businesses have poor credit ratings, or could simply be a risk, is leading to them being charged higher rates. A staggering 71 per cent of these businesses said they had been hit with unexpected terms and conditions, such are higher rates or inflexible payment options while almost half (45 per cent) have been asked to make large upfront payments for their energy supply.

More worryingly, one in five small and micro businesses (21 per cent) have been turned down flat when applying for energy simply due to their size.

Commenting on these findings, Shaun Underwood, director of commercial energy for Utilita, says, ‘This survey shows the stark state of affairs for small businesses in today’s climate. Small businesses are the backbone of our economy and restricting their access to vital services only stifles their ability to grow and support the wider economy. Utilita wants to support businesses which is why we won’t turn down small businesses despite poor credit ratings or charge upfront deposits.

‘This issue of accessing vital services goes much wider than the energy sector which is why we’re highlighting some of the simple but effective steps that small and micro businesses can take to improve their credit score and improve their access to the services they need.’

Top tips to improve your business credit score:

  • Pay your bills on time. A negative record of paying on time can indicate a poor cash position.
  • Limit your credit usage and keep debt low, however, use some credit to create a history.
  • Regularly check your credit rating using an online tool and correct any mistakes immediately.
  • Register your business with a credit reference agency or directory to make sure there is a record of your business. If your business is below the radar it could affect you getting credit.
  • Check the credit position of your suppliers to protect yourself if something happened to them.
  • Avoid closing accounts when paid off.
  • If you’re a start-up business, keep a close eye on your personal finances. If financial information about your business is not available, your personal data could be used as an indicator.
  • Avoid County Court Judgements but if one does occur make sure it’s paid off immediately.

Also see: Concern over disparities in credit ratings for small companies

A good company credit score can make it easier to secure funding

Peter Tuvey, founder and managing partner of Fleximize, offers his advice on how you can improve your company’s credit rating:

High street banks and traditional lenders are usually unwilling to grant funding to businesses with a history of county court judgements (CCJs), non-payment of loans or late credit card payments. Whilst lenders in the growing alternative finance sector are generally more flexible on loan eligibility, it is still important that companies present the best credit score possible when applying for funding, as it might allow them to qualify for a lower interest rate and thus lessen the total cost of their loan.

With this in mind, here are some ideas on how to improve your company’s credit score.

Audit your credit report

To monitor and tackle any problems early on, it is important to regularly review your credit rating by purchasing credit reports.

Credit reports are compiled by credit reference agencies, and are based on data available in the public domain about your business. Using this data, these reports make a recommendation on the probability of a loan being paid back on time.

When assessing these reports, it is important to pay attention to items in the ‘negative’ category and to look out for signs of outdated information, business fraud or identity theft. It is worth noting that each credit bureau has a unique formula for calculating scores, and each lender will look at different types of data. As such, maintaining several of these online credit reports will prove beneficial for your business.

Think carefully about when you apply for credit

Each credit application you file will be noted on your credit report, even if these applications are unsuccessful. Therefore, each time you are rejected for a loan, it could be damaging your credit history. Lenders will often be put off if a business intends to rely solely on financial credit. You will want to consider this before applying.

Credit agencies also take into account the difference between your current assets and liabilities, so having a positive cash flow will contribute to a higher credit score. If you’ve got a good cash flow, then you will most likely be dubbed a more ‘creditworthy’ business.

Focus on paying creditors on time or early

To show you are a sensible borrower, try to make repayments on time and pay your accounts off early. Whilst each credit agency crunches their numbers differently, all will consider your credit repayment history. The longer the positive credit history, the more you stack the odds in your favour, so the sooner you adopt the habit of prompt payments, the better.

Credit utilisation is also taken into account when applying for credit, so avoid maxing your card to the limit or using more than 70% of the funds available in your account.

Credit scoring agencies will often compensate for a dearth of information by contacting your suppliers, so try to ensure you pay them on time too. Not only is this beneficial for maintaining good business relationships, but it will ensure that you get a good reference when you go searching for finance.

Use lenders that report to credit reference agencies

A good payment history can boost your business credit if your lender reports to credit bureaus. Banks tend to report to credit agencies, but if you have poor credit then it will be difficult to secure this type of loan. Whilst there are several other finance options available for your business, it is worth enquiring as to whether they report to credit agencies in advance.

Be wary of county court judgments

You may get a county court judgement (CCJ) or high court judgement if someone takes court action against you for money they believe you owe them. If you do get a CCJ registered against you, settle it within 28 days to ensure that the judgement is cancelled and will not appear on your record. Unpaid county court judgements can appear on your register for up to six years, so avoid this at all cost.

The bottom line

Building good business credit should help you attain a lower-interest small business loan or business credit card, not to mention better terms from suppliers. If you prove yourself trustworthy, it might even attract new customers to your business, given the public nature of business credit scores.

In an increasingly tech-dominated world, small businesses have a wide range of financial options available to them, particularly from non-traditional finance providers. Alternative lenders such as Fleximize offer a less bureaucratic, more efficient process, so SMEs can get funded quicker. They also take a more flexible approach to lending, often looking beyond a company’s credit history and trying to find a way to say ‘yes’ to every application.

However, it’s worth remembering that your company and personal credit scores are still assessed, so you’ll need to get them in shape before applying for funding.

Peter Tuvey is co-founder and managing partner of Fleximize.

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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