How to increase your business credit score

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Small business owners often find themselves looking for external funding sources to grow their business. But to qualify for a business loan and other financing options, you need to have a good business credit score.

Business credit scores help lenders, creditors and suppliers evaluate whether a business will be able to pay them on time. Maintaining a good business credit score means you can secure bigger loans, lower interest rates and even flexible repayment schedules.

Here’s a quick overview of what qualifies as a good (low risk) or bad (high risk) business credit score.

business credit score pyramid

Lenders and credit reporting agencies look at several factors to determine your business’s credit score—from your trade experiences to your payment history to the number of credit applications you’ve made in the past and more.

In this article, you’ll learn how to improve your business credit score so you can qualify for better financing options and grow your business successfully.

Top Tip: Establishing a good business credit score takes time, but it’s worth it for better financing options. Learn what a business credit score is, how it’s determined and why it’s important in our guide on ​​everything you need to know about your business credit score 📈

Table of contents

1. Separate your business and personal finances

Some small business owners use the same bank account for both personal and business transactions. For example, you might be tempted to use your personal credit card to make a large, one-time purchase for equipment.

However, using your personal credit cards can influence your business credit score. Exactly how varies on the type of business you run. If you run a limited company, for example, lenders can check your personal credit score (and the records of your business’s partners and directors) to gauge risk. If you have poor personal credit, you may get a smaller loan than requested, or be denied a loan entirely.

If you don’t have a separate business credit card, banks and credit reporting agencies might also look at your personal credit score to assess your creditworthiness. This is often the case with startups and new businesses because they don’t yet have a meaningful financial history of loans and repayments.

Applying for a business credit card and using it for your business transactions keeps your business credit separate from your personal credit. And as long as you make your payments on time and keep your credit utilisation ratios in check, your business credit score will continue to improve, and your personal credit score will not affect your business credit score.

We’ll learn about making regular payments and credit utilisation ratios in a moment.

Top Tip: A poor personal credit rating can affect a new business’s financing and credit card eligibility. Despite this, it’s still possible to finance your business. Learn how to build business credit with a low personal credit rating 💰

2. Regularly check your credit rating

Checking your business credit report regularly can help you catch errors and improve any potential dips, so you can avoid high interest rates when applying for loans or credit cards. 

It’s important to note that checking your credit score does not impact your credit rating. Requesting too many hard checks in a short space of time may impact your credit rating.

To clarify, here’s a quick overview of hard vs soft credit checks.

  • Hard credit checks are usually initiated by lenders and utility companies during the application process. They provide a comprehensive picture of your financial responsibility.
  • Soft credit checks are a basic check that includes key pieces of information, such as the ones run to pre-qualify candidates for credit options or when you check your credit score.

To check your business credit score, reach out to major credit reporting companies like Dun & Bradstreet, Equifax or Experian. They’ll provide you with a soft check of your credit score, including a score range reflecting your good or bad credit status.

Since these companies sell credit information to lenders looking to finance a business, data on these reports is critical. Checking them regularly can help you catch any issues in your profile.

Luckily, credit reporting agencies usually have dispute processes in place that let you fix errors and remove inaccurate negative feedback from your file. If you see something that shouldn’t be there, make sure you report it and try to get it removed.

Learning about your business credit rating can also help you identify opportunities to boost your business credit score quickly. For example, you may discover you need to ask your suppliers to report your good credit history with them.

It also allows you to make business decisions in future that can positively impact your credit rating. For example, a bad score may indicate that you need to let go of some client accounts that aren’t great at paying you promptly. 

3. Make your payments on time

The best way to improve your business credit score is to pay your bills on time. If you have a poor track record of making timely payments, you may not come across as creditworthy to lenders and suppliers.

Even worse, businesses you owe money to, like suppliers and utilities companies, can report you for late payments. Fixing a bad credit score can be tough, so make sure you do everything possible to stick to your payment deadlines.

Some things you can do to ensure timely payments include enabling reminders on your phone or computer, setting up automated payments and assigning particular days of the week or month to make payments.

Making timely payments can also help you stay in your suppliers’ good books, which can directly affect your credit score if they report your payment history. 

Top Tip: Predicting your cash flow can help you plan timely payments and access business credit. Connect your business bank account for spending insights and pre-eligibility checks. To increase your credit score and support your business’s financial health, explore Tide’s Cashflow Insights 🎉

4. Build good relationships with suppliers

Another thing you can do to improve your business credit score is to build good-standing, long-lasting relationships with your suppliers.

If you have a long-term relationship with a supplier and always make your payments on time, you can open a credit account with them to increase the total number of “positive” payments to your file.

Credit agencies value a business’s credit repayment history, and establishing a credit account with your supplier is a great way to boost your score.

Also, keep in mind that not all suppliers report your good credit behaviour to credit bureaus. If you have a good relationship with your suppliers, you can ask or remind them to report your positive payment history.

If they still fail to report your payments, you can manually add trade references to your company’s credit file with credit reporting agencies (such as those mentioned above). The credit reporting agency will then reach out to your supplier to verify the information. 

You should reach out to your suppliers before resorting to manually adding trade references, as sometimes suppliers will not respond to the credit agency.

5. Keep your credit utilisation ratio in check

When you apply for credit, reporting agencies look at something called the credit utilisation ratio (CUR). This ratio depicts the amount of credit you’ve used as a percentage of the total amount of credit you were offered.

For example, if you have a total of £12,000 available on a credit card, but you only use £6,000, your CUR is 50%.

Even if lenders award you more than you need in credit, it’s wise not to use the entire amount. The rule of thumb is to use less than 70% of the total funds available in your credit account. 

This is also helpful to know when deciding on how much credit to apply for. You should always request more than you need so you aren’t passing the CUR threshold recommendations, penalising yourself in the process.

If you have already borrowed credit from a credit card provider, you can request that they increase your credit limit in order to decrease your credit utilisation ratio. However, keep in mind that your bank may not oblige your request, and you should avoid seeing this as an opportunity to spend more.

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credit options small banner v1 mobile

6. Avoid closing your accounts

Some business owners make the mistake of closing credit accounts and removing them from their credit reports. However, withdrawing your credit history can negatively impact your business credit score. 

Closing a credit account is not the same as closing a bank account. Closing a bank account does not impact your credit rating.

Even if you don’t use an old credit account, your history of making payments on time still contributes to your overall credit score. In fact, the older your credit line grows, the more your creditworthiness increases.

This is also related to your CUR. Your CUR is calculated based on your total credit availability. If you close accounts you no longer use, you’re actually increasing your ratio.

7. Reduce the number of credit applications

Applying for business credit several times in a short period can do more harm than good to your credit profile. Here’s why:

  • Every credit application is added to your credit report, even if it’s unsuccessful.
  • If you apply for credit repeatedly, credit reporting agencies might assume that you’re struggling financially.
  • When you apply for credit, your business credit score will drop by a few points.

Many businesses need financing to grow, which is why they apply for credit in the first place. But it can be off-putting for many lenders if they see that your business continually relies on credit to operate.

The solution is to only apply for credit when you absolutely need to and maintain a positive cash flow in the long run. That’s because credit reporting agencies also take into account the difference in your company’s current assets and liabilities.

One way around applying for credit repeatedly is to request a quote from lenders on how much you can borrow. This avoids lenders running official hard checks on your creditworthiness.

Top Tip: There are more ways to inject cash into your business than taking out a loan or getting a credit card. Make the right decision for your company by learning more ways to get capital in our article on 10 ways to fund your small business 🔟

8. Be wary of county court judgements

Lastly, to increase your business credit score, you must ensure there are no legal actions against your business. This usually happens when you owe money to people or when they believe you owe them money.

Disgruntled lenders or suppliers may register a case against you through a county court judgement (often referred to in reports as CCJ) or a high court judgement.

You’ll get 28 days after that to settle your case and cancel the judgement to avoid it appearing in your record. However, failing to do so may negatively impact your overall credit score for up to six years.

If a CCJ is on your credit record, it signifies a huge question mark for lenders when they’re considering whether or not you’re likely to make repayments on time, if at all.

So first, make sure you avoid getting into any legal trouble at all. And if you do, try to settle the case as soon as possible, so it doesn’t leave a lasting scar on your credit report.

Wrapping up

Establishing a strong business credit score can help your business acquire finances from lenders with favourable interest rates and payment terms. 

But a good credit score isn’t achieved overnight. You have to consistently make your payments on time, regularly pay off your credit balances and build great relationships with your suppliers.

If you’re looking for more ways to increase your business credit score, open a free business bank account and explore Tide Credit Options today. Make the most of our suite of features to stay efficient, predict your cash flow and gain access to business credit.

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credit options small banner v1 mobile

Photo by RODNAE Productions, published on Pexels

Rupa Gohil

Partnerships Manager and small business accounting advocate

Tide Team

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