A good business credit score is essential to your business’s success. Whether you’re aiming to gain new contracts, negotiate for more favourable terms with your suppliers, or secure a business loan, having a strong business credit score can facilitate business growth and mitigate any issues that could hold you back. Unfortunately, many businesses unknowingly make mistakes that can harm their credit score. We have collated some of these common mistakes that affect your business credit score and offer guidance on how to avoid making them.
What can affect your business credit score?
1. Failure to review your business credit report.
One of the most commonly made mistakes by business owners is their failure to check their business credit profile on a regular basis. While this does not directly cause a bad business credit score, a lack of awareness of your business credit score can indirectly lead to score-damaging issues, such as errors, identity fraud, late payments or unresolved legal notices, all going unnoticed.
Therefore, it is recommended that business owners regularly check their business credit reports so that any issues or mistakes are spotted early.
2. Delayed or missed payments.
As with your personal credit score, late or missed payments can have a significant negative impact on your business credit score. To prevent this and ensure all your bills are paid promptly, set up reminders, automate payments where possible, and monitor your financial commitments closely. You should see an improvement in your business credit score by consistently meeting your financial obligations.
3. Not building a credit history.
If your business is just starting out, it might not have a long credit history yet. Building up your credit history requires time and handling your finances responsibly. You could consider getting a business credit card or taking a small business loan to kickstart your credit history. Making timely payments on these accounts can gradually boost your credit score.
4. Making multiple credit applications at the same time.
When you request a loan, lenders usually thoroughly check your business credit through a hard search. Having several hard inquiries in a short space of time may make your business seem risky and could harm your credit score. If you need a business loan, it’s wise to limit the number of applications to avoid multiple hard searches. Using a service such as Capitalise will allow you to connect with lenders who are more likely to approve your application, reducing the need for multiple applications and unnecessary hard credit searches.
5. Neglecting your supplier relationships.
As your business credit profile shows your historical payment performance, you may be negatively affected by your suppliers paying late. Take the time to invest in and strengthen your relationships with your suppliers, maintaining open communication and increasing the likelihood of timely payments.
6. Filing your company accounts late.
Credit bureaus assess businesses’ creditworthiness by examining information gathered from various sources. The accuracy of your business credit score depends on the amount of information available to them. Companies House, where your filed accounts are stored, is a crucial information source for credit bureaus. It’s essential to file your accounts on time, as late submissions can have a harmful effect on your business credit score.
Incorporated businesses are required to submit their accounts to Companies House within nine months of their year-end. To enhance the accuracy of your credit score, consider submitting full accounts rather than abbreviated ones, as they provide more detailed information for the credit bureau’s evaluation.
7. Ignoring legal notices.
Receiving legal notices, like a County Court Judgment (CCJ), can significantly harm your business credit rating. If a CCJ is issued against your business, it’s important to respond within 30 days because it can affect your credit profile for as long as 6 years.
You can get immediate alerts for registered legal notices using a service such as Capitalise for Business. This way, you can take prompt action to minimise the impact on your business credit score.
Steering clear of these common errors can help minimise negative effects on your business credit score. Maintaining a strong business credit score provides a competitive advantage and unlocks doors to various opportunities. In addition to steering clear of common mistakes, it’s important to proactively work towards establishing a positive business credit score.
Get in touch
If you would like to know more about the services we offer that can help to improve your business credit score, call us on 01792 410100 or email mail@bevanbuckland.co.uk.