Company credit check – Improving your business credit score

In today’s competitive business landscape, a strong credit profile can be the key to unlocking growth opportunities and securing favourable financial terms. This comprehensive guide explores the intricacies of business credit scores, their impact on your company’s financial health, and strategies to enhance your creditworthiness in the UK market.

What is a business credit score?

A business credit score is a numerical representation of a company’s creditworthiness, typically ranging from 0 to 100. It serves as a key indicator of a business’s financial health and reliability to potential lenders, suppliers, and partners. Credit reporting agencies calculate this score using various factors that reflect the company’s financial stability and payment history.

Unlike personal credit scores, business credit ratings are publicly available. This enables other companies to perform a company credit check to assess the financial risk of engaging in business relationships. A higher score generally indicates lower risk and can lead to more favourable terms for loans, credit lines, and supplier agreements.

Major credit bureaus in the UK that provide business credit scores include Experian, Equifax, Creditsafe, and Dun & Bradstreet. While each agency may employ slightly different scoring models, they all aim to provide an accurate assessment of a company’s financial reliability. Regular monitoring of your business credit score is crucial for maintaining financial health and identifying areas for improvement in your company’s credit profile.

How to check a business credit score

Now that we understand the importance of a business credit score, let’s explore the various methods available for checking your company’s creditworthiness in the UK market.

1. Credit Reference Agencies (CRAs)

The primary CRAs that provide business credit scores in the UK include:

• Experian: Offers “My Business Profile” for viewing your score and receiving alerts about changes.
• Equifax: Company directors or owners can request a statutory business credit report directly from their team.
• Creditsafe: Registered directors can obtain a free company credit check, including credit score and other key financial indicators.
• Dun & Bradstreet: Their Credit Monitor solution provides access to your D&B Payment Score and other credit-related information.

2. Online Platforms

Several online platforms offer business credit score checks, such as Credit Passport and Tide’s Cashflow Insights.

3. Companies House

While Companies House does not provide a credit score, it offers access to public records about your company that contribute to your credit rating.

4. Banks and Financial Institutions

Some banks offer credit score checking services to their business customers as part of their financial management tools.

When checking your business credit score, it’s important to note that each CRA may use slightly different criteria and scoring ranges. To obtain a comprehensive view of your business’s creditworthiness, it’s often beneficial to check a business credit score with multiple agencies. For a reliable and comprehensive assessment, consider using our commercial credit reports to help you credit-check other businesses and avoid financial risk.

Factors affecting your business credit score

Understanding the elements that influence your business credit score is crucial for improving your company’s financial standing. Let’s examine the key factors that credit agencies consider when calculating your score:

• Payment History: Promptness of payments to suppliers and creditors, consistency in meeting financial obligations, and any late payments or defaults on loans or credit accounts.
• Credit Utilisation: The proportion of available credit your business is using can significantly impact your credit report.
• Length of Credit History: The duration of your business’s credit history plays a role in your overall score.
• Public Records: Legal issues such as County Court Judgments (CCJs), insolvency proceedings, and bankruptcies can severely impact your credit score.
• Company Information: Basic details about your business including company size, structure, industry sector, and years in operation.
• Financial Performance: Your company’s financial health, as reflected in your accounts, impacts your credit report.
• Credit Applications: The number and frequency of credit applications can affect your score.
• Director Information: For small businesses, the credit history and financial conduct of company directors may influence the overall company credit ratings.

For a more detailed understanding of how these factors impact your business credit score, you can read our article on the importance of business credit scores.

Interpreting your business credit report

Once you’ve obtained your business credit report, it’s essential to understand how to interpret the information provided. Let’s break down the key components of a UK business credit report:

• Credit score: A numerical value, typically ranging from 0-100, representing your company’s overall creditworthiness.
• Payment history: Demonstrates how promptly your business pays its bills and invoices.
• Public records: Information on County Court Judgments (CCJs), insolvency proceedings, or other legal matters affecting your business.
• Company information: Basic details about your business, including registration date, industry sector, and company structure.
• Financial performance: Analysis of your company’s accounts, including turnover, profitability, and liquidity ratios.

Different credit reference agencies use varying scales for business credit reports. For instance, Experian scores range from 0-100, with scores above 80 considered low risk, while Creditsafe uses a scale of 1-100, where scores above 70 are deemed low risk.

After interpreting your UK business credit check, consider addressing any inaccuracies, developing strategies to improve areas of concern, and regularly monitoring your credit report to track improvements and identify potential issues early.

Strategies to improve your business credit score

Now that we’ve examined the factors influencing your business credit score and how to interpret your report, let’s focus on practical strategies to enhance your company’s creditworthiness:

1. Pay Bills Promptly: Ensure timely payment of all business obligations to establish a positive payment history.
2. Monitor Credit Utilisation: Aim to use less than 30% of your available credit to demonstrate responsible credit management.
3. File Full Accounts: Provide a comprehensive view of your financial health by filing full accounts with Companies House.
4. Update Business Information: Regularly update your business information with credit agencies to ensure accuracy.
5. Limit Credit Applications: Avoid making multiple credit applications in a short period to prevent negative impacts on your score.
6. Separate Personal and Business Finances: Keep personal and business finances separate, especially for new business credit, to establish a clear financial profile.
7. Regularly Review Your Credit Report: Check your business credit report regularly to identify and rectify any inaccuracies promptly.

By implementing these strategies consistently, you can work towards a stronger business credit score, enhancing your company’s financial stability and opportunities for growth in the UK market.

The impact of a strong business credit score

As we conclude our exploration of business credit scores, it’s important to understand the significant benefits that a strong credit profile can bring to your company:

• Access to better financing options: Secure loans with lower interest rates, obtain higher credit limits, and qualify for more favourable repayment terms from UK lenders.
• Enhanced credibility with suppliers and partners: Enjoy more flexible payment terms from suppliers and increased likelihood of securing contracts with larger clients in the British market.
• Reduced need for personal guarantees: Less reliance on personal credit for business matters and reduced risk to personal assets when seeking business financing.
• Lower insurance premiums: More affordable business insurance rates and access to a wider range of insurance products from UK providers.
• Competitive advantage in tenders and contracts: Increased confidence from potential clients in your financial stability and higher likelihood of meeting pre-qualification criteria for large contracts in the UK.
• Easier expansion and growth opportunities: Secure funding for new locations or equipment more easily and attract potential investors or partners in the British business landscape.

By understanding how business credit works in the UK context and maintaining a strong score, companies can position themselves for long-term success and financial stability in the competitive British market. Regular monitoring and proactive management of your UK business credit score can open doors to numerous opportunities and contribute significantly to your company’s growth and resilience.

If you’re facing challenges with your business credit or need assistance in managing your company’s financial health, our debt help services can provide you with free, confidential advice on dealing with debt problems across the UK.