Your business credit score explained

Your business credit score can determine the success of your business. But recent research found that only 55% of UK SME owners knew their credit score when asked.

It’s really important to understand how scoring works, what can affect it, and how to improve it. Our guide aims to help.

What your business credit score is

Your business credit score is a number that measures the creditworthiness of your business. It helps lenders and suppliers know how likely it is that you’ll pay your bills on time.

Credit Reference agencies (CRAs), like Experian for example, gather information on your business credit behaviour. This includes payment history, total debt, and information on any business finance or credit.

They use this information to give your business a score out of 100, with 0 being high risk and 100 being low risk.

Why it’s important

If your score is low, it’ll be harder to secure any funding you need. And you’ll have to pay more for that funding, in higher interest charges. That means you’ll have less money to invest in growing your business.

Suppliers are likely to complete a credit check before starting to work with you. A higher score will give them confidence that you’ll pay them on time. And it might lead to better terms from them.

If your customers are businesses, they’re likely to check your credit score too. They’ll want to see that your business finances are healthy.

As you can see, a good score could help you get funding, onboard a new supplier and win new business. A low score could limit your business potential and growth.

You can also check the credit scores of potential suppliers and clients. And do a regular check on your current business contacts. You’ll be able to spot any signs of financial difficulty that could affect you or stop you getting paid.

What can affect it

The type of accounts you file

Smaller companies can file simplified, or abridged, accounts each year. Submitting full accounts, giving more information on your finances, can lead to a better credit score.

Your payment record

Your history of paying your bills on time can affect your credit score. Paying on time will avoid any negative outcomes.

County Court Judgements (CCJs) and insolvency proceedings

Not paying your bills on time can lead to those you owe taking action to get their money back, like CCJs and insolvency proceedings. These will negatively impact your credit score, making it very hard to get finance. They can also affect your personal credit score.

How to improve it

As well as the points above, there are a few other things you can do to improve your score.

• If any of your business information changes, for example your registered office address, update it. Let your suppliers, customers and HMRC/Companies House know.

• If you’ve a good working relationship with your suppliers, you can ask them to give you feedback and share payment record data with CRAs.

• Only apply for credit when you need to. Making lots of applications in a short time results in lots of searches, and this can look like you’re struggling to get funding. You can use eligibility checkers or ask for quotes instead.

• Check your business credit score regularly. You can sign up for alerts when anything changes on your record. This will let you sort out any issues fast.

• Make sure your personal finances are healthy. If you're a start-up with little financial information available, lenders might use data from your personal accounts to calculate your business credit score. This is also true for sole traders.

More support

Ready to explore external funding? Read our How to fund your business article.

You’ll need to do some preparation before applying. Read our Get ready for funding article for help.

Review our range of borrowing and finance options

British Business Bank have lots of articles with more information on business finance. They also have a finance finder tool that can help you with potential finance options.

If business finances are a struggle for you at the moment please visit our support page

The SME blind spot: Why it pays to know your business credit score | money.co.uk