A Guide To Business Scores

By Jamie Stewart on 28th December 2018

When it comes to business scores, there’s only really one clarity, the fact that most people plainly don’t understand them. Figures, jargon and complicated paperwork are just some of the obstacles you’ll likely encounter when you try to file your business credit score. Fortunately for you, we here at Think Business have created a guide to the much-maligned and complicated topic, so you don’t have to be confused anymore.

What Is A Business Score?

A business credit score is much like a personal one, it measures a business’s creditworthiness, i.e. its ability to repay loans and other debt obligations on time.

The score is calculated using a variety of criteria, including a business’s payment history, the amount it currently owes on any outstanding loans and the length of its credit history. It also involves whether it has taken out any credit recently and the type of credit it has used in the past.

This information is then used to determine the score- which indicates whether a company is a risk or not. A business credit score usually falls between 0 and 100, the higher your score, the more appealing your business appears to prospective lenders, and lower the score, the riskier an investment it seems.

There are five main commercial Credit Reference Agencies (CRAs) in the UK including:

  • Dun & Bradstreet
  • Equifax
  • CreditSafe
  • Graydon UK
  • Experian

Why You Should Know Your Score

It’s incredibly important to know your score because having a good rating benefits you and your company in a variety of ways, it will help you with approvals for financing and receive better rates for loans, all of which will aid in the growth and expansion of your business.

However, even with all these positives effects, many businesses, especially SME’s don’t even have a vague idea of their score. A recent study revealed that 45% of small business owners weren’t even aware that they had a credit score and a further 80% couldn’t interpret their score even if they did.

That same study also revealed that business owners, who know of their business scores and understood them, were therefore 41% more likely to be approved for a loan than those who don’t know their score.

It also important to keep track of how your score might differ from agency to agency, as lenders may use an aggregated total from all five of them, in order to grant you a loan. Let us explain how you can do that below.

How To Check Your Score

To receive or check your credit score, you will most likely need to register your business with a recognised reporting agency. Depending on which one you choose, you may also need to apply for a Data Universal Numbering System number, however, most will automatically register your business and track your score based on corporate filings readily available to the public.

Unfortunately, you will have to pay a fee to see your business credit score report; however, some agencies will give you a free report and let you track changes to your score when you first use their service.  Prices among each of the five main commercial Credit Reference Agencies do vary, so it’s worth doing your research around each to see which price and service fit your business best.

For example, as it currently stands, for any credit report from Equifax, the average fee is around £78 whereas Experian’s Intelliscore Plus report comes in at a price of around £30. So whichever you choose, make sure you do it at least once a year so that you’ll always be aware of any changes to your score.

How To Improve Your Score

If when you do check your business score, you feel there is much to be left to be desired with your rating out of 100, there are a series of actions you can implement to improve your business credit score for the future.

As we’ve already mentioned, each of the five main commercial Credit Reference Agencies takes into account your payment history when they calculate your score and business profile. It is for this reason that paying any lenders or creditors for any outstanding loans or bills on time, is of paramount importance.

Also, the amount currently outstanding on any financial debts you might have is also taken into account when agencies are calculating your credit score. So if say you have a bill that amounts to £500 and one that is £100, then it’d be wise to pay the higher one first, as the lower outstanding fee will have a less of a significant effect on your score.

Similar to an independent credit score for a civilian, it’s best to keep to your business’s use of credit to a minimum; this will benefit your profile in the long run. As an industry standard, whatever your credit allowance is, you should aim to use no more than a third of its entirety, this will help to show the reference agencies that your business is not volatile when it comes to financing.

Additionally, it’s important to avoid having any blemishes on your business’s credit profile; these can be avoided if you run your business smoothly. However, just to give you a heads up they include bankruptcies, repossessions and defaults on payments, all of which will have a detrimental effect on your score.

It’s also very important that you maintain a good personal credit score since many lenders will often look at this alongside the business’s score. Specifically, when it’s a small business owner, as their ability to manage their own finances will likely reflect on their capacity to manage a business’s finances.

There you have it, Think Business’s comprehensive guide to business scores; we hope it has gone some way to simplifying the very complicated concept. If you now want to make use of that knowledge, apply for a business loan and use our comparison tool, you can get in touch with a member of our team on 0203 880 9880 or complete our online enquiry form.