How to Improve Business Credit Score Ratings

Whenever we’re asked how to improve business credit score ratings, the answer is always the same: which one?

Credit scores for businesses are created by many more outlets than a personal profile. This can understandably make it difficult to know which credit rating agency’s score is being used at any particular time. On top of this, each agency has different methods for calculating their scores, resulting in some vastly different ratings seen between agencies for the same company.

In fact, the difference between scores from different credit agencies can often be extreme, with one agency recommending no credit at all and another the opposite, despite the data used in their calculations being virtually identical.

Is it important to discover how to improve business credit score ratings?

Yes. While you may decide to choose the outfit that furnishes your company with the best score as your go-to agency, you have little idea which agency everybody else is using to gain an understanding about your own company.

Most companies will have their business credit score ratings checked over many times without even noticing. This can be from suppliers, insurance companies, lending firms and even utility providers. More concerning still, is that clients and competitors may also decide to take a look.

This is fine if your business credit score is strong, but although you may have an almost perfect rating with some agencies, others may deem you a lending risk. In some cases, this can severely narrow down your options for suppliers, putting an unwarranted squeeze on your profit margins.

How can a bad credit score affect my business?

A strong credit score can be the difference between success and failure for some businesses. With trading conditions so difficult at the moment due to the economic landscape, the difference between the deals a good or bad rating can enable can be crucial.

A better business credit score not only opens up more options for suppliers or service providers being prepared to let you access their services or to borrow from them, but it can also provide better rates. Suppliers might offer better deals, and funding can be secured promptly if your business ever runs into trouble.

How is a business credit score calculated?

The size of your business, how long it’s been established, and its payment history to creditors will often be used to calculate a credit score. Outside of these more obvious factors, however, a bureau may use any number of other means to determine your company’s credit rating. When you then consider that there are several different agencies using different calculations, you can start to see how things can become a little muddy.

Where do business credit rating bureaus collect their information from?

One of the problems businesses have is that the data used to calculate their ratings can often be outdated, and in some cases, just plain incorrect.

Many databases have multiple records for the same business (one has over 300 separate records for the same builders’ merchants) which undermines the accuracy of credit scoring and can also increase the risk of identity fraud.

How to improve business credit score ratings by checking for errors

Because of the inaccuracies routinely found in the databases that business credit bureaus use, it’s strongly recommended that companies conduct a credit profile review every so often.

A review of data can determine any existing issues and enable planning for upcoming problems. This is especially true when considered in conjunction with wider business strategies that may have an impact on credit scores.

Any positive adjustments made will result in being able to keep the credit taps open, provide more choice of suppliers, and possibly attract extra sales opportunities.

How often should I perform a business credit profile check?

It’s recommended to review your company’s profile for inaccuracies every few years, and perhaps more frequently if your business has undergone some changes in the interim.

The first review is undoubtedly the most important however, especially for well-established companies that are likely to have old details cluttering up their files. That initial review will straighten out any issues and provide a much more accurate, and generally healthier-looking credit score.

What is the quickest way to improve my business credit score?

As you might expect, just by hiring a specialist service that reviews and amends your company’s credit profile, you can notice big differences very quickly. As long as you’ve paid your creditors on time, adhered to statutory filing requirements and avoided legal disputes you should find that a better score is on the cards from most agencies.

Of course, if you’ve routinely paid after terms and allowed disputes to become litigious, then you’re unlikely to see a positive change. In general, though, if you’re finding your borrowing or supplier options more limited than you would expect, it could well be down to bureaus using incorrect data.

How else can directors improve their business credit scores?

While having a specialist service check over your company’s credit profile for discrepancies is one of the quickest ways to see considerable change, there are, of course, best practices to follow in order to keep your score healthy.

Pay your bills on time

Just like your personal credit file, your business credit score will take a hit if you routinely pay suppliers after the agreed terms. Worse still, continually missed payments can lead to CCJs or insolvency proceedings, which can create a serious dent in your company’s credit profile.

Keep your personal finances in order too

New businesses with little financial information behind them, such as startups, may see lenders look into the director’s personal credit files instead. With little else to go on, some will use this data to help calculate their lending risk. In general, it’s a good idea to keep your business and personal finances separate.

Consider filing full accounts

When filing your statutory accounts at Companies House, consider filing full accounts instead of abridged, filleted, or micro-entity accounts. By filing full accounts, you’re able to provide service providers or lenders with as much accurate data as possible about your company’s financial position. However, if you prefer not to file full accounts the use of a specialist service can offer other options.

What is a good business credit score?

In general, over 50 is acceptable and over 80 is great.

Bear in mind that different credit bureaus and their users will all have differing ideas on what is deemed a high or low risk when assessing risk. With the scoring range between zero and 100, though, you can see that the aim is to get as close to 100 as possible.

Could your company’s credit score be better?

There’s the possibility that it actually should be better. By allowing us to check through what bureaus are sharing when their users research your company, we can spot inaccuracies and old information that could be holding you back. Call us on 0800 975 0380, or email [email protected] for a free consultation to find out how we can help.