A business credit score is a numerical rating that reflects the creditworthiness of a business.
Similar to a personal credit score, it is based on a business’s credit history, including payment history, credit utilization, and outstanding debt. Lenders, landlords, and suppliers use business credit scores to assess the risk of doing business.
A good business credit score for small businesses directly affects your capacity to obtain financing, secure favourable terms on loans, and receive credit lines. Without these things, growth becomes much more difficult.
In this article, we’ll cover the subject in detail, exploring how credit scores work, how to check them, and how to monitor them on an ongoing basis.
How Do Business Credit Scores Work?
Business credit scores work similarly to personal credit scores, but they are based on a business’s credit history rather than an individual’s. They are used by lenders, landlords, and suppliers to assess creditworthiness and the level of risk by implication.
A business credit score is typically calculated based on information from a report compiled by specialist credit bureaus such as Experian, Dun & Bradstreet, and Equifax. These reports include the business’s credit history, payment history, outstanding debt, and credit utilization.
Credit bureaus use a proprietary algorithm that considers various factors to calculate a business credit score. These factors can include the length of time the business has been in operation, the number and types of credit accounts, and the business’s payment history.
The score is usually presented as a number on a scale, such as 0 to 100 or 300 to 850, and a higher score indicates better creditworthiness. Credit bureaus use different scoring models and ranges, so a business’s score may vary depending on the source.
It’s important to note that business credit scores can change over time. Maintaining a good credit standing is crucial by paying bills on time, keeping credit utilization low, and monitoring your credit report regularly.
Is a Business Credit Score Different From a Personal Credit Score?
Yes, a business credit score is different from a personal credit score. A business credit score is based on a business’s credit history, while a personal credit score is based on an individual’s history.
Business credit scores are used by lenders, landlords, and suppliers to assess the creditworthiness of a business. They’ll consider the business’s payment history, outstanding debt, and credit utilization.
On the other hand, personal credit scores are used by lenders and other financial institutions to assess an individual’s creditworthiness when applying for loans, credit cards, and different types of credit. They’ll consider your individual payment history, outstanding debt, and credit utilization.
While both scores are essential, business owners must understand that the two are distinct. Business owners should strive to maintain a good credit standing for their personal and business credit scores.
What does a business credit check show?
A business credit check typically shows the following information:
- Business name and contact information
- Credit score and history
- Payment history and patterns
- Public records and liens
- Business financials
- Trade references and suppliers
- Industry information and risk assessment
What Affects My Business Credit Score?
Several factors can affect a business’s credit score. These include:
Payment history
One of the most critical factors affecting a business’s credit score is the business’s payment history. This includes information on whether the business pays its bills on time and whether there are any late payments or outstanding debts. Lenders and suppliers often look at the payment history as an indicator of the business’s overall financial health.
Outstanding debt
Another essential factor affecting a business’s credit score is the business’s outstanding debt. This includes information on how much debt the business currently has, the types of debt (such as credit card debt, loans, etc.), and the amount of available credit. Lenders and suppliers often look at outstanding debt as an indicator of the business’s ability to manage its finances and repay loans.
Credit utilization
Credit utilization refers to the amount of credit a business uses compared to the amount of credit available. High credit utilization can indicate that a business is overextending itself financially and maybe a red flag for lenders and suppliers.
Length of credit history
The time a business has been in operation can also affect its credit score. A more extended credit history can indicate stability and reliability, whereas a shorter credit history may make lenders and suppliers more cautious.
Mix of credit
The mix of credit a business has can also affect its credit score. A mix of different types of credit, such as loans and credit cards, can indicate that a business is financially responsible and able to manage various types of credit.
4 Ways to Check Your Business Credit Score (Free & Paid)
There are several ways to check your business credit score, including:
(1) Get a Free Credit Score with Experian
Experian is a leading global information services company that provides credit information and analysis to businesses and consumers. Its business score is called “Paydex Score”, which ranges between 0-100 and reflects the business’s payment history.
To check your business credit score with Experian, you can follow these steps:
- Sign up for an account at: https://www.experian.co.uk/business-express/business-credit-report/
- Request your report: Choose a one-off report or 3-month trial.
- Review your report: Look over your report and check for accuracy. Make sure that all of the information is correct and up-to-date.
- Understand your credit score: Experian uses a numerical score to rate your creditworthiness, with a score of 100 being the best and a score of 1 being the worst.
Cost: 3-month FREE trial. £24.99 + VAT per month after your trial. Alternatively, get a one-off report for £24.99.
(2) Get a free credit report with Creditsafe
Creditsafe is a global provider of business credit reports and scores. It covers over 360 million companies worldwide and provides a detailed report and score, including financials, payment history, and more.
- Sign up for an account at https://www.creditsafe.com/gb/en/credit-risk/credit-reports/company-credit-reports.html
- Choose “My free company credit score” to obtain a copy of your report free of charge
(3) Get a free basic business credit score with Credit Passport
Credit Passport is a business credit reporting service provided by CRIF Realtime Ltd., a London-based Fintech. It allows business owners to access their business credit reports and score, monitor their credit standing and get alerts on changes to their reports.
- Sign up at: https://www.creditpassport.com/
- Get your basic score free, based on the new open banking standard
For £20 monthly you can get the ‘plus’ account which gives you greater insight, plus analysis and badges.
(4) Get a business credit report with Dun & Bradstreet
Dun & Bradstreet is one of the world’s oldest and most widely recognized credit reporting agencies. It provides a range of business credit reports and scores, including the D&B Credit Score, which ranges from 1-100 and reflects the business’s creditworthiness.
- Sign up at: https://www.dnb.co.uk/products/small-business/check-your-business-credit.html
- Select a Subscription
- Get your credit report
Annual subscriptions are £234 per year
Reviewing Your Business Credit Report
When reviewing your business credit report, it’s essential to pay attention to the following important information:
- Credit score: Look for your business credit score, typically presented as a number on a scale, such as 0 to 100 or 300 to 850. Note the score and the range used by the credit bureau. It’s important to understand that credit bureaus may use other scoring models and ranges, so your score may vary depending on the bureau and the model used.
- Outstanding debt: Look for information on your outstanding debt, including the types of debt and the amount of available credit. This can give you a sense of your overall financial health and whether you’re overextending yourself financially.
- Payment history: Look for information on your payment history, including any late payments or outstanding debts. This is one of the most critical factors that can affect your business credit score, and lenders and suppliers often look at payment history as an indicator of your overall financial health.
- Credit inquiries: Review the credit inquiries section of the report, which shows which companies have pulled your credit report. This can give you a sense of which companies are interested in your creditworthiness and help you identify any potential fraud.
It’s also essential to address any errors or discrepancies in the report. These can include inaccuracies such as incorrect payment history, outstanding debts or credit inquiries. If you find any errors, you should contact the credit bureau and dispute them errors. They will investigate the error and make necessary corrections.
What’s a Good Business Credit Score?
A good business credit score can vary depending on the scoring model used by the credit bureau. However, a score above 70 is generally considered good and will likely qualify you for credit or loans with favourable terms. A score above 80 is considered very good and will likely qualify you for the best terms and rates.
For example:
- Experian’s Paydex Score ranges from 0 to 100, and a score of 80 or above is considered good.
- Equifax’s Business Credit Score ranges from 0 to 100, and a score of 75 or above is considered good.
- Creditsafe’s score is based on a 0-100 scale, with a score of 80 or above considered good.
- Dun & Bradstreet’s D&B Credit Score ranges from 1 to 100, and a score of 80 or above is considered good.
It’s important to note that a good credit score is not the only factor lenders and suppliers consider when assessing creditworthiness. Other factors, such as the industry, company size, and time in business, will also be considered.
What credit score is needed for a business?
The minimum credit score required for a business loan varies depending on the lender and type of loan. Generally, a score of 660 or higher is considered a good credit score for small business loans, but some lenders may require a higher score. Other factors that lenders consider include the business’s revenue, cash flow, and length of time in operation.
It’s worth noting that some alternative lenders may work with businesses that have lower credit scores, but these loans may come with higher interest rates and fees.
Monitoring Your Business Credit Score
Monitoring your business credit score is essential in maintaining a good credit standing and ensuring that you’re in the best position to apply for credit or loans. Here are some tips on how to monitor your business credit score:
- Check your credit report regularly: You should check your business credit report at least once a year, but ideally more often, such as every quarter. This will allow you to catch any errors or discrepancies and address them promptly.
- Use credit monitoring services: A variety of credit monitoring services can help you keep track of your credit score and report. These services will send alerts about changes to your credit report, such as new credit inquiries or updates to your payment history.
- Check multiple credit bureaus: As different credit bureaus may use other scoring models and ranges, it’s essential to check your credit score and report from various bureaus. This will give you a complete picture of your credit standing and help you identify any inconsistencies.
- Address negative information: If you find any negative information on your credit report, such as late payments or outstanding debts, it’s essential to address it promptly. This can include contacting the creditor to make payment arrangements or disputing errors with the credit bureau.
Are There Any Free Options for Checking a Business Credit Score?
Yes, there are free options for checking a business credit score in the UK. Some of the popular free options include:
- Creditsafe: Creditsafe offers free access to a limited version of its reports and scores if you take a free trial.
- Experian Business Express: Experian offers a free 30-day trial that will allow you to check a credit report.
- Dun & Bradstreet: Dun & Bradstreet offers a free service that will give you four of your business credit scores and ratings free for 14 days
Business Credit Score FAQs
Is it free to check my business credit score?
Some credit bureaus and credit monitoring services offer free credit reports, but others charge a fee.
How often should I check my business credit score?
It’s recommended to check your business credit score at least once a year, ideally more often, such as every quarter. This will allow you to catch any errors or discrepancies and address them promptly.
What’s a good business credit score?
A good business credit score can vary depending on the scoring model used by the credit bureau. Generally, a score above 70 is considered good, and above 80 is considered very good.
How can I improve my business credit score?
Improving your business credit score involves paying bills on time, keeping credit balances low, and monitoring your credit report regularly. It’s also essential to address any errors or discrepancies on your credit report in a timely manner.