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How to Check & Improve Your Business Credit Score

29 November 2022

A survey in 2018 by credit reference agency, Experian, revealed that almost a fifth of small business owners don’t fully understand what business credit scores are. In addition, 37% of the businesses surveyed didn’t know, or weren’t sure of, their own business’s credit score.

Your business credit score can have a huge impact on your ability to raise credit and carry on your day-to-day business. Every time you apply for a business credit card or small business loan, the lender will check your overall credit health to decide if you’re eligible. But, as the survey shows, many business owners pay little regard to what their credit score is, or how to improve it.

In this article, we’ll explain:

What is a business credit score?

A business credit score is a simple measure of company’s financial health and risk profile - or its creditworthiness. It ranges from 0 to 100; the higher, the better. The credit score forms part of a your overall business credit report or credit profile. The report includes much more in-depth business information such as any debtors whom you have financial agreements with or make regular payments to.

It’s easy to find out your own business credit score as there are a number of credit agencies such as Experian who allow you to obtain a copy of your firm's credit report. You can also find out the credit score of organisations you do business with or are considering working with. 

Why is it important to check your company credit score?

As part of their due diligence into your company’s financial viability, lenders will perform a company credit check to determine your creditworthiness. By monitoring your score yourself, you’ll keep up-to-date with what your creditors can see, and determine whether you need to take steps to improve it in advance of applying for business finance.

Your business credit score has the potential to affect many aspects of your ability to do business, so it’s vital you keep a close eye on where it’s at:

  • Borrowing and obtaining credit: a good business credit score will mean lenders will be more likely to offer you finance. In addition, you could secure more favourable interest rates. A low credit score means you will either struggle to secure credit, or you’ll typically be charged a higher interest rate.
  • Interest rates: as your business credit score is an indication of your ability to meet your financial commitments, a low score signals a greater credit risk for lenders, and could mean higher rates on loans.
  • Business partners: few companies will want to do business with a company in financial difficulties. A healthy business credit score will reassure current and potential business partners that you’re financially secure and stable, and that you won’t let them down by not paying your staff and suppliers, or even going under.
  • Suppliers: knowing your business credit score will help you build stronger relationships with your suppliers. As they have a keen interest in being paid on time, they’re likely to run a business credit check to assess your financial health. If you regularly take steps to discover your business credit score and improve it, you’ll be in a stronger position to work with suppliers of your choice.

Is your business credit score different from your personal credit score?

Yes. A business credit score is an indicator of the financial wellbeing of the business. A personal credit score is about an individual’s credit position - their personal ability to repay a debt.

The two may be linked, particularly if you’re a director of your own company, or in business on your own as a sole trader or in a partnership. A lender may carry out both business and personal credit searches when considering a loan application.

Before applying for a business loan as a director or sole trader, it’s worth checking to find out what your personal credit score is. If you discover it’s too low, you may want to take steps to improve it as personal credit scores can impact on your ability to secure business finance (see below).

Does your own personal credit score impact your ability to secure business finance?

Although a limited company is a separate legal identity, its business success relies strongly on the performance of the individuals operating it. So a lender will often require personal credit checks on the directors/shareholders, as well as the company. A low score could negatively affect the company’s loan application.

Other situations in which a personal credit score could impact on your ability to secure business finance include:

  • Loan guarantees. Where a lender requires a personal guarantee from a director, or a lien or security over the director’s house or shares, the lender will check the director’s personal credit score. A poor credit score is likely to reduce the chances of a successful application.
  • Sole traders often merge their personal finances with the finances of the business. Before lending money, a creditor will need to be satisfied that the business owner, as well as the business, has a good credit score.

How can you check your business’ credit score?

There are a number of individual credit reference agencies (CRAs) in the UK, also known as credit bureaus. They use various factors to calculate your business’s credit score. You can run a check on yourself and find out your business credit score for free, or for a small fee.

A free service will only get you your business credit score. If you want a more detailed report into your business credit profile, you’ll need to take out a paid subscription.

  • Experian: Experian uses the Delphi score to predict credit risk and potential business failure. You can review and improve your business credit score for £24.99 per month, with a three-month free trial.
  • Dun & Bradstreet: a world-leading CRA, D&B uses the Paydex Score to measure a business’s past payment performance, based on information in the D&B data cloud.
  • Creditsafe: a number of packages are available enabling you to obtain company credit insights into your business and those of your competitors and suppliers.
  • Credit Passport: an easy-to-use, free business credit score service.

What factors influence your company’s credit score?

CRAs use a wide range of information to estimate the financial health or your business and calculate your business credit rating. They scrutinise company records, public records, databases and customer and supplier behaviour to determine the financial viability of the company.

  • Company size. How big is your business and how long have you been trading?
  • Payment history. Do you pay your bills, tax and loan repayments on time, or do you have a record of missed or late payments?
  • Legal claims. Have you had any County Court judgments (CCJs) entered against you? Are there any other past or current legal issues?
  • Filing requirements. Have you filed your accounts and other records on time with Companies House?
  • Insolvency. Have any insolvency or bankruptcy proceedings been taken out against you?
  • Credit requests. How often do you apply for credit?
  • Customer base. How reliable are your customers and how efficient are you at taking your receivables/managing debtors?

How to improve the credit score of your business.

Once you’ve identified your business credit score, it’s important to continue to monitor it and take steps to improve it. There are a number of ways you can boost your credit score including.

  • Paying your bills, tax, loan and interest repayments on time (or early).
  • Minimise any outstanding loan agreements or other financial debts.
  • Don’t apply for credit too often as each check can lower your score for a period of time.
  • Get your accounts filed with Companies House on time.
  • Deal with CCJs quickly.
  • Check your business credit score regularly, so you can build on it.
  • Stay on top of your personal finances.

Once you’re ready to apply for finance, make sure you take a look at our 12 Tips for Successfully Securing a Business Loan.

Ready to take the next step?

So, now that you know how to check your business credit score and improve it you should be ready to move onto the more exciting part of securing finance.

Talk to us about our range of finance solutions and let us help you grow your business.

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