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5 Tips to Improve Your Business Credit Score

By: Sharon Pascoe


Tips to Improve Your Business Credit Score

Most people have a decent understanding of their personal credit score, but not so many are as familiar with their business credit scores. Your business credit score is crucial in determining whether or not your enterprise is fit to borrow, how much interest you’ll have to pay on credit, and in some cases, whether or not other companies will want to deal with you at all.

There are several ways you can check your business credit score, which is a very good idea if you’ve never tried to do so before. In this article, we’re going to be highlighting 5 important ways your business can improve and preserve its credit score. Your business will certainly need a decent credit score if you plan to apply for credit cards, loans or to borrow from any outside sources in its name.

Have your heart and mind set on growing swiftly and smoothly over the coming years? Check these tips out to learn just how to keep your score in top condition. Let’s start with:

1. Business credit cards

One of the fastest ways to reach a higher credit score for your business is to use a secured business credit card. These cards are “secured” with a deposit that you’ll need to pay in order to attain them. They are suitable for those that have a less favorable credit score but can comfortably pay the deposit.

You can expect most deposits in the UK to be around the £400 – £600 mark. In many cases, the issuers of these cards will only want to offer them to business owners who’ve been operating for a certain amount of time, so this might not be a viable option for you if you’ve just started trading.

Once you have one of these cards, the aim is to never exceed 10% of your limit and to make repayments swiftly. This behavior should result in the steady increase of your business credit score.

Don’t have the cash to pay such a high deposit? You can also take a look at “prepaid” cards which are also sometimes known as “fleet” credit cards. Unlike the secured cards, prepaid credit cards often have a lower deposit amount and are more suitable for business owners with lower than average personal credit scores. Have a shop around for cards like this to get the ball rolling on improving your business credit score right away.

2. Ensure your business accounts are in good order

Running a limited company? Then your company accounts will be filed annually at Companies House. Many leading credit agencies scan through the accounts of limited companies to help them build their scores. So one of the things you can do straight away is make sure your company is handling its accounts as favorably as possible. This means filing full accounts rather than abbreviated ones and handing your accounts over to Companies House well before the deadline.

If you or whoever takes care of your accounts is in the habit of getting your accounts to Companies House just in time, the processing time could mean they end up being filed after the deadline. In the eyes of credit agencies, this can be classified as late which can then result in a drop of score. Prevent this from happening by completing and sending your accounts well ahead of the deadline!

3. Make payments in good time

This is a bit of a no brainer but it can make all the difference. If your business already has credit, repay it quickly and consistently. Your business credit score, much the same as your personal credit rating, will rise as you behave in a way that attracts lenders and shows them that you’re responsible with credit.

4. Try revenue based financing

Revenue based financing is a type of credit where the lender agrees terms based on the revenue performance of your business. It will suit those with a booming business that has achieved great sales but only has a credit score of around 500 – 600. This can be an effective way for a well performing business to reach excellent credit score levels before applying for larger loans.

Compared to a typical bank loan, revenue based loans can usually be agreed and processed much faster, as the lender can clearly access details of your bank accounts to see proof of your sales from transfer or credit card customers.

5. B2B credit

This is often referred to as “trade financing.” It’s essentially a case of your business receiving credit from another business. In most cases, these are like short-term loans that are agreed over a time period spanning less than a month. Taking one of these and ensuring you repay promptly can be an effective way to improve your credit score quickly.

As with any other type of loan from a private entity, you must always credit check your creditors before accepting terms with them. The last thing you want is to damage your score or run into trouble by making credit agreements with uncredible suppliers.

Published: June 25, 2018

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