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The Know-it team

Dec 29, 2020

How to improve your business credit rating fast, for a brighter future

How to improve your business credit rating fast, for a brighter future

If you’re looking for help on how to improve your business credit rating fast, you’re not alone.

It’s a question thousands of business owners ask because of how important it is to have a solid business credit score.

Having a good business credit rating puts you in good stead for a successful future and gives you some extra security if any unexpected events arise, especially useful given the uncertainty of economy and the skyrocketing cost of living!

Depending which credit reference agency you use, your rating may vary. This is because each one uses slightly different criteria and algorithms to calculate a business credit rating. But typically, a good business credit rating according to one credit reference agency will translate to a good business credit rating with another so following the steps below are worthwhile no matter what credit reference agency you use.

Why you should improve your business credit rating

Having a good business credit rating gives you freedom.

It opens up a host of opportunities for growth and expansion, whilst also giving you peace of mind if there’s a downturn in your market. In the event that you require extra funding such as a loan or even need to purchase a large quantity of stock from a supplier your business credit score will likely be checked.

Your business credit rating is essentially used to indicate how trustworthy your business is concerning money. A low rating suggests that a company is slow paying invoices (if they pay them at all) or don’t abide by payment terms so are deemed to be high-risk to lenders and suppliers.

Your business credit rating will dictate how much money you’re able to borrow, how much stock you can purchase per order, payment terms and interest rates so having a low rating can restrict how your business operates and will limit your growth potential.

Why does your business have a poor credit rating?

Chances are if you’re reading this article you want to improve your business credit rating.

Even if you don’t have a “poor” credit score there are factors that will lower your business’ rating. The most common reasons for a lower business credit score include:

  • Missed payments including loans, credit cards, suppliers or other expenses such as rent.
  • Late payment or not abiding by agreed repayment / credit terms.
  • County Court Judgements (CCJs).
  • Insolvency or bankruptcy.
  • Having a poor debt to credit limit ratio, also known as credit utilisation rate.
  • Late filing accounts to Companies House.
  • Making multiple credit applications at the same time.

Fraudulent activity can also have a negative impact on your business credit rating as criminals would typically try and take out credit and loans in your company’s name. If you notice a sudden unexpected drop in your business credit score, it’s always worth checking for potential fraud.

Whether your business has a poor, fair or good credit rating it always helps to improve it where you can. Here are the best ways to build your business credit rating, fast!

How to improve your business credit rating fast

Keep relevant parties up-to-date with any changes

If there are any changes to your business, financial or otherwise, be sure to inform any customers, lenders, suppliers, banks and directories like Companies House of the changes. Inconsistencies or inaccuracies in your information can make your business look untrustworthy and unreliable. This could negatively impact your rating.

Make your payments on time

This may seem like an obvious step in building your business credit rating, but it can’t be forgotten. Creditors will want to ensure that they can get their investment back on the agreed date. When a business fails to make its payments to a creditor this can lead to negative reports and the appearance of financial instability. A series of negative credit reports can hurt your business credit rating and reduce your ability to get credit. 

Clearly show your finances such as your turnover

Using your business bank account regularly is a great way to do this as lenders will clearly see how much you’re turning over, a key factor in their credit lending decisions.

Submitting your full accounts on time to Companies House will also give your business credit a rating a boost. Full transparency is key when lenders assess your businesses credit worthiness.

Open banking is relatively new and connects banks, financial institutions and other third-parties such as apps to securely exchange data to give you and your business more clarity and control over your finances. Opting into open banking gives lenders more visibility over your finances and your business credit rating could improve as a reward for this.

Set up a private limited company (ltd)

Incorporating a private limited company and registering with Companies House means that your business would be a separate legal entity from yourself.

How does this impact your business credit rating?

If you don’t have a private limited company when you apply for credit for your business, lenders will usually take your personal credit rating into account when you apply for credit. Setting up a private limited company will give your business its own credit rating and reporting and you’ll typically get higher credit limits as your personal mortgage, car repayments and credit cards etc wouldn’t show on your business credit report, unless they were taken out through your business.

Limit your credit applications

You may think that many credit applications would be a good thing – more credit equals a higher credit rating, but this isn’t often the case. Credit applications often require credit searches on your business which are recorded on your credit report. If you do too many credit applications within a short period of time it can suggest that a business is struggling to secure funding, which can scare off lenders and negatively affect your business credit rating. One way to get round this is to ask for a quote first before committing to a full credit application.

Reduce your debt to credit ratio

Having high levels of debt in proportion to your total credit limit is a major red flag to lenders and suppliers and will be reflected on your business credit file.

As this can be such a big factor on your business credit score, paying off any balances, increasing monthly repayments and decreasing your credit card spending are a sure way to quickly improve your business credit score.

Dispute any errors on your credit file

If you notice any irregularities on your credit report you should address them immediately and it’s also your responsibility to make sure all the information on your credit file is up to date.

Errors and irregularities can have a huge impact on your business credit rating so if you notice any issues you should contact the credit reference agency you use and make an official dispute. Once this is rectified you should see an improvement on your business credit score.

Establish a good relationship with your suppliers

If you work with the same suppliers on a regular basis and you have a good financial rapport with them, ask if you can open a credit account with them. Establishing good credit accounts over a long period of time will help to improve your credit score which will provide them with all the information they need to provide your business with credit.

How to check and monitor your business credit rating for free

Check and monitor your business credit report with Check-it!

Our automated credit checking and monitoring tool brings you the most up to date intelligence from multiple reliable sources to help you make the most informed credit decisions.

Our partnerships with Graydon, Companies House, The Gazette and Unsecured Creditor Claims gives you access to more data than standard credit reports, all in one place!

Running a credit report on your own company using Check-it, you will be updated of any changes on your business credit report thanks to our credit monitoring facility. There’s no need to keep running monthly credit checks as you’ll always be notified of any changes to your credit report. When working to build your business credit rating fast it’s vital that you’re always able to monitor your progress to make sure your efforts are having a positive impact on your business credit file.

Unlocking key insights from your own business credit rating will help you see what improvements you could make for a better financial future for your business.

Best of all, you can get started and run your first credit report for free!

Checking other business credit ratings

Whilst maintaining your own credit score is extremely important you should also be in the know about the shape of your customers’ credit reports.

Check-it makes it easier than ever to better understand credit information on your customers. You’ll have direct access to real-time credit information from our partners, on all your customers. When you run a credit report on a company you’ll have access to their credit rating, guidance on what sort of credit limit to offer, insight into their payment behaviour as well as any notices from The Gazette, company information from Companies House and any Unsecured Creditor Claims.

The beauty of Know-it is that all this information is presented in one clear and easy to read dashboard inside the Know-it platform, saving you time and making important credit decisions easier. Our alerts mean you’ll be instantly notified of any changes to your customer’s credit reports meaning you can take swift action when needed. You’ll also be alerted to potential fraudulent behaviour, which can have a negative impact on your own business credit score.

Easily connect your accountancy package

Know-it makes credit management simple. Connect your accountancy package in seconds and get full visibility of your customer’s credit information so you are always making the most informed credit decisions, which will have a direct impact on your own business credit score.

Know-it automatically matches the businesses on your sales ledger from your accountancy package with data from our partners, so you can access credit and company information for your customers instantly.

Keeping up with changes to your own business credit score is vital when trying to build it. Check-it gives you all the insight you need to help build your business credit score fast, as well as keep you up to date with any changes with our real-time credit monitoring.

Run your first credit report today and try Know-it free for 30-days!

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