A good business credit score is important for all businesses, affecting everything from winning new contracts and negotiating favourable terms with suppliers, to accessing business loans and other finance.
There are many factors which affect your credit score, and many businesses make common mistakes which can negatively impact their score. In our latest blog, we explore the top seven mistakes business owners make when it comes to business credit scores.
Not checking your business credit report
A common mistake is failing to regularly check your business credit profile. Although this won’t directly affect your score, keeping a close eye on your profile will mean you quickly spot any errors, identify any fraud or flag issues like late payments, or unresolved legal notices.
You can check your business credit score for free through our partnership with Capitalise for Business, including real-time alerts which will inform you immediately if anything is impacting your business credit score.
Late or missed payments
Similar to your personal credit score, late or missed payments can significantly affect your business credit score. It is essential to pay your bills promptly – set up reminders, automate payments (where possible) and keep track of your financial commitments to ensure your obligations are met.
Think about integrating an app such as Futrli to help you understand your business better with cashflow forecasts which will help you predict the likelihood of cash shortages; helping you avoid any late or missed payments.
Not establishing a credit history
If you have a relatively new business, you will not have an extensive credit history. Consider opening a business credit card or taking out a small business loan to start establishing your credit history, as timely payments on these accounts can help towards building your credit history. Remember, building a credit history can take time, and there is a requirement for responsible financial management throughout this process.
Applying for too much credit at once
When you apply for credit, lenders will usually carry out a hard credit search on your business. Multiple hard searches within a short period could negatively affect your score as you may appear as ‘high-risk’. If you are looking for a business loan, speak to us. With the help of our partners at Capitalise for Business, we can help match you with lenders who are most likely to approve your application to reduce unnecessary hard credit searches.
Ignoring supplier relationships
Remember – your business credit profile displays historical payment performance. If you pay your suppliers late, it could negatively impact your credit score. Think about strengthening your relationships with suppliers by paying on time and maintaining open and honest communication with them.
Filing your company accounts late
Your credit score is calculated based on information from various different sources, therefore, the more information the credit bureaus have access to, the more accurate your score will be. AN important source of information for this is your filed accounts with Companies House. If you file your accounts late, your business credit score is likely to be negatively impacted.
Not addressing legal notices
Legal notices like CCJs will severely impact your business credit score. If a CCJ is filed against your business, it is crucial to address it within 30 days, as it can be visible on your credit report for up to 6 years. By regularly checking your credit score, and using tools such as Capitalise for Business, you can receive instant alerts to any legal notices registered, so you can act fast and reduce the impact to your score.
Get in touch
Through our partnership with Capitalise, PM+M offer access to Capitalise for Business which gives businesses a deeper insight into their score and what’s impacting it, plus the ability to credit check their customers. As part of this, you can access the Credit Review Service which can help improve your business credit score and limit by providing more up to date financials for Experian to review. There is a guarantee that if your business credit score doesn’t improve whilst using the service, you get your money back.
Find out more by watching our recent webinar in partnership with Capitalise on managing your business credit score and mitigating risk to your cash flow – click here.
To hear more about how Capitalise for Business and their credit review service could help you, get in touch by emailing cloudaccounting@pmm.co.uk.
