5 ways to improve your commercial credit score
For many UK business owners, applying for commercial finance can be a daunting task. As well as having to source a product suitable for your business’ goals, you also need to understand what factors lenders will take into consideration when reviewing your application. This includes your commercial Credit Score, which serves as an indicator of how well your business is performing financially. So, although the level of attention given to this score varies between products, lenders will usually request permission to review it all the same. However, if your business has an adverse credit score, this could impact your eligibility for certain business finance products and directly affects how much interest you’re charged. So if you’re looking to acquire business finance but are worried about your credit score, there a number of ways in which you can improve your financial situation.
Generate a commercial credit report
Before deciding to apply for business finance, your first task should be to undertake a review of your current financial situation, which can be achieved by requesting a Commercial Credit Report from one the UK’s leading credit agencies (e.g. Equifax, Experian or TransUnion). Although you may need to pay for the report, it will give you a greater understanding of what issues are affecting your commercial credit score and perhaps find a solution. Plus, even if you’re not seeking to apply for business finance just yet, it might be a good idea to periodically check your score, all the same, giving you more time to improve your financial situation should you need to.
Keep on top of your financial obligations
One aspect that directly affects your commercial credit score is your ability to resolve debt on time. If you’re not keeping up with your business’ financial obligations and are frequently making late payments or, worse still, not paying them at all, your commercial credit score is certain to suffer as a result. From the lender’s perspective, this will present you as having a high risk of defaulting on the agreement and may lead to a decline. As such, in order to improve both your credit rating and reputation, the value of keeping up with your financial obligations cannot be overstated.
Another area to watch out for is your business’ credit utilisation ratio, which is affected by your reliance on company credit cards and how much you're borrowing. Yet, if your credit utilisation is having an adverse effect on your commercial credit rating, there are a number of ways in which you can turn the situation around:
- Resolve credit balances on time
- Request to increase your credit limit
- Reduce your spending to below 50% of your credit limit
- Avoid opening up excessive amounts of credit facilities
County Court Judgements (CCJs) are something that every business needs to avoid but if you receive a CCJ for any reason, it’s imperative that you resolve it as soon as possible. Plus, although CCJs may continue to show up on your commercial credit profile even after they’ve been paid, resolving it is much more preferable to lenders then leaving it outstanding.
Resolve any errors
Finally, if you spot any errors and/or details that are out-of-date when reviewing your commercial credit profile, you need to inform the credit agency responsible as soon as possible. Even spelling mistakes and incorrect account information can have an adverse effect on your commercial credit score. So when reporting to the credit agency responsible, you need to make sure that you have sufficient evidence available to argue your corner and that what you’re reporting is factually correct. Though it can be a time-consuming process and may require some negotiating, resolving any errors can go a long way in improving your commercial credit rating.
Looking to apply for business finance with poor credit?
Although possessing an adverse commercial credit score is something that every UK business owner wishes to avoid, the realities of being your own boss aren’t always that simple. Yet, although possessing an adverse credit rating may cut you off from some funding solutions, there are other products available that could accommodate your business, including Invoice Factoring, Overdraft Replacement, Merchant Cash Advance (MCA) and Asset Refinance. All you need to do is source an agreement that’s suitable for your business’ needs, which is where we can help.
At Rangewell, we’re an Access to Finance specialist and have mapped over 400 finance lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide and support you throughout the application process. So if you’ve got an adverse commercial credit score but need access to additional capital, all the same, apply for a Bad Credit Loan today or find out more with Rangewell.