Given the problems that business owners have had over the past few years, from the pandemic to the current cost of living crisis, there’s a good chance that many have used up some or all of their emergency fund or taken out credit to keep ticking over.
If you’ve ever tried to get a loan or credit card, you’ll be well aware the importance that your personal credit score plays – if you’re after the best deals, you have to work hard to get your score up to the required level. But what about your business credit score?
What is a business credit score?
A business credit score gives an indication of how creditworthy lenders will consider your business, in much the same way as your personal credit score gives an indication of your personal creditworthiness.
Although each lender will have its own lending criteria, and will look at factors such as how long you’ve been trading and your annual turnover, it will also take into account your business credit score – the higher your score, the more likely it is that you’ll be accepted for credit. A higher credit score will also mean your business is more likely to be offered preferable rates on business finance.
Is your business credit score linked to your personal credit score?
Your business credit score and personal credit aren’t linked, and both contain different information – lenders look at different factors when it comes to business and personal finance.
Having said that, your business credit score and personal credit score may be be related, which means a lender might also consider your personal credit score when deciding whether to lend to you. This is especially true if you’re a sole trader, as banks and other lenders will almost certainly reference your personal credit to see how well you manage debt.
How to find your business credit score
The simplest way to find your business credit score is to check with the relevant credit reference agencies, but be aware you might be charged a fee to do so. The three main business credit reference agencies in the UK are Dun & Bradstreet, Equifax Business and Experian Business.
And be aware that lenders do have their own criteria, so while having a good score with one or all of these agencies will mean you have a better chance of acceptance, it’s not a guarantee that you’ll be accepted for credit.
How to build your business credit score
Building your business credit score can take time, but once you’ve established good business credit, you may be able to qualify for financing without a personal guarantee.
To start building your business credit score, you should make sure you do the following as soon as possible:
- Pay your bills on time.
- Limit your credit usage and keep debt low.
- Regularly check your credit report for errors.
- Make sure your business is registered with a credit reference agency or directory to make sure there is a record of your business.
- Always check the credit position of your suppliers to protect yourself if something happened to them.
And if you’ve just started up your business, make sure you keep a handle on your personal finances and personal credit score – remember, lenders might cross-reference your personal credit file, especially if there is little or no information on your business credit report.
Do you operate in a credit score hot spot?
Using two of the biggest credit agencies, Share to Buy has calculated and mapped out the average credit score data to reveal where the country’s best and worst scorers live, and who tops the national average of *570. Their analysis revealed the following:
Highest Credit Score Area in the Country
Oxfordshire has the highest average credit score in the country at 1258, over two and a half times the national average of 570.
Highest Credit Score Areas
- Oxfordshire: 1258
- Surrey: 1255
- Dorset: 1239
- Hampshire: 1236
- Berkshire: 1236
Lowest Credit Score Area in the Country
Nottingham has the lowest average credit score at 1104, 154 points lower than Oxfordshire.
Lowest Credit Score Areas
- Nottinghamshire: 1104
- County Durham: 1112
- Leicestershire:
1117 - Yorkshire: 1119
- Lancashire:
1132
