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The Know-it Blog

The Know-it team

Dec 29, 2020

How To Build Your Business Credit Score Fast

How To Build Your Business Credit Score Fast

If you’re looking for help on how to build your business credit score 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 score 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 how the economy will look in the near future.

Depending which credit reference agency you use, your business credit score may vary. This is because each one uses slightly different criteria to calculate a business credit score and they use different scales. But typically a good business credit score according to one credit reference agency will translate to a good business credit score with another.

Why you should improve your business credit score

Having a good business credit score 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 purchase a large quantity of stock from a supplier your business credit score will likely be checked.

Your business credit score is essentially used to indicate how trustworthy your business is concerning money. A low business credit score 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 score 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 score can restrict how your business operates and will limit your growth potential.

Why does your business have a poor credit score?

Usually, there will be signs if your business has a poor credit score. 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 credit rating as criminals would typically try and take out credit and loans in your company name. If you notice a sudden unexpected drop in your business credit score it’s always worth checking for potential fraud.

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

How to build your business credit score fast

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 score?

If you don’t have a private limited company when you apply for credit for your business, lenders will usually take your personal credit score into account when you apply for credit. Setting up a private limited company will give your business its own credit score 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.

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.

Stay up-to-date

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 credit score.

Make your payments on time

This may seem like an obvious step in building your credit score 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 score and reduce your ability to get credit. 

Limit your credit applications

You may think that many credit applications would be a good thing – more credit equals a higher credit score, 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 credit score. 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 score.

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 score 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.

How to check and monitor your business credit score

Check and monitor your business credit score 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 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 score 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 credit score.

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

Checking other business credit scores

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 of 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 of 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.

Connecting your sales ledger

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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