8 tips to improve your business credit rating

As a result of the recession, many more small firms in the UK are carrying a credit rating that may negatively affect their ability to obtain credit finance and favourable credit terms from suppliers. In a survey in mid-2009, up to 60% of small businesses in a sample of three million were described as ‘high risk’ or ‘above normal risk’, in terms of defaulting on trade payments or getting into financial difficulties.

There are many ways you can help improve your business’s credit rating. Here are some suggestions from the ‘Better Payment Practice’ Campaign. Thanks to Business Link for alerting us to these:

1. Always pay on time
The payment experiences of your suppliers are a key part of your credit profile so, to drive a positive credit rating, you should always pay to agreed terms. If you don’t, you can detrimentally affect your ability to get credit, not only from suppliers, but also from banks and other finance providers.

2. Ensure that all relevant trade experiences are represented
A lack of information on your profile can be just as harmful as a poor credit history. There is no requirement for companies to send information about their customers to credit bureaux, so the key to establishing a business credit profile and high rating is to forge relationships with companies that will establish credit for your business and who may report positive information when asked, as part of a trade reference request.

3. Get listed and keep your registrations up to date
Credit agencies check various sources such as telephone enquiries services and Companies House to confirm that your business is genuine, so ensure your business is listed in telephone directories. If yours is a limited company, also ensure that company registration details are accurate and up to date, and that accounts are filed on time.

4. Keep your personal finances in order
Credit agencies can offer the option of reviewing the personal credit profile of key individuals, particularly within smaller businesses that do not have a detailed business credit rating, so it is important to keep on top of your own finances.

Here are four more ideas that we have come across from working with clients:

5. Filing your accounts at Companies House
If your most recent year shows poor results, consider delaying filing them! If they show good results, send them in quickly. Beware of filing accounts late as this can have a negative effect (see 3 above).

6. Make sure that your SIC (industry code) on your annual Companies House return is correct
If you have a code for an industry that is struggling, this may affect your own company’s rating.

7. Legal status and age of your business
Limited companies generally get scored higher than non-limited business, so this may be another reason to go limited. BUT older, longer-established businesses get scored higher than new ones, so beware of resetting your business age clock back to zero!

8. Size of the business
Bigger businesses tend to get scored better than smaller ones, so if your business is growing fast, this should help you. Make sure that any growth is picked up by the credit agencies ASAP.

Experian, the leading credit reporting agency, adds this advice for business credit card holders:

• Decrease the balance on your business credit cards
• If you have good credit, requesting a credit line increase can improve your credit even more, because this increase lowers the percentage of your available credit in use
• If you have a generally positive credit history with a business credit card, don’t close the account
• Keep track of your credit reports – asking for your business’s credit report will not affect your rating