Credit and Finance, Growth
What’s a Good Business Credit Score?
Posted on by Jo Shaw
Estimated read time: 4 mins
As a business owner, you’re used to wearing plenty of different hats, from setting a strategy for the year ahead and dealing with clients, to managing staff and internal issues.
With so much on your plate, it might not come as surprise that, in a recent Experian survey, almost a fifth of small business owners admitted to having an insufficient understanding of business credit scores.
However, as your business grows, knowing your business credit score, and more importantly, how to improve and maintain it, is essential for your continued success.
What is a business credit score?
A business credit score is a value generated by credit reference agencies like Experian. There are a whole range of different factors that contribute to how a business credit score is calculated and depending on whether your company is registered to Companies House or not, these deciding factors will differ slightly.
The resulting value is then used by banks, creditors and suppliers so they can make a well-informed decision about whether to offer you credit and the amount to offer.
A good rating can help you borrow larger amounts, or pay less interest on the amount borrowed, as lenders can use your business’ credit score as an indication that you’ll be able to meet the payment terms. The higher your score, the better your chances of getting credit.
What is a good business credit score?
A business credit score ranges from 0 to 100. The higher the credit score is, the better position financially a business is deemed to be in. However, the closer a businesses credit score is to zero, the less likely they are to be offered credit.
The graphic below explains a little bit more about what different credit scores mean.
What factors influence a business credit score?
A business credit score provides a snapshot of your business’ financial health, and is influenced by a number of factors, including past payment performance.
Regularly paying bills on time will be reflected in a higher credit score, which indicates to creditors that your business has a healthy positive cash flow.
As well as keeping up with payments, issues such as receiving a County Court Judgment (CCJ), can have a negative effect on your business credit score.
Why is knowing your business’ credit score important?
If a customer or another company is planning to go into business with you, it’s likely that your business credit score will influence their decision. Therefore, by monitoring your business credit score with Experian’s My Business Profile, you’ll always be up to date with the full picture of what your creditors see.
Your business credit score isn’t just important when you’re looking to get credit from the bank, it could also potentially affect which businesses choose to work with you. In fact, with tools such as Experian Business Express, the credit history of any business can be viewed at any time, by potential suppliers, business partners, or even competitors.
As a business owner, you know to expect the unexpected, but with the help of business tools from Experian, you don’t need to leave your business credit score up to chance.