There are a number of reasons as to, why many business owners may need credit. By credit we mean a business loan or a credit card. either way your business credit rating will form on the basis of the decision as to whether you are accepted or not.
What is Business Credit Rating?
A business credit rating forms in the same way as personal credit scores. A business credit score is built on the financial history of the business. The lenders will use these scores to determine if a business is likely to meet repayments.
Many businesses choose to open a business account, apply for a loan or get a mobile phone for business use, all of these will be affected by the business credit score. This can have an impact on whether you are accepted or not. This can also have an effect on the rates you are given.
For many reasons if you have a low business credit score, this could be because you may not have made several payments, then you might struggle to gain the funding you need for the business. You may be given interest rates which are a lot higher than those promoted. Therefore it is very important to have a great credit score.
Where Can You Find Your Business Credit Score?
Firstly, there is no single business credit score for your business. Therefore, there are a number of credit reporting companies, they all use their very own scoring methods. Lenders will opt to use different credit reporting companies when they need to determine your credit score.
As Accountants in Telford and Wellington, we have advised number of business on issues relating to their credit scoring and how to get it better. Call us if you need any advice related to your personal needs and circumstances.
Enhancing Your Business Credit Score
As your personal credit score, there are a number of things which you can do to improve your business credit score.
Firstly, check your rating. It is common for slipups to be made and so, you can help identify these and ask for relevant corrections to be made.
Secondly, open a business bank account in the name of your business this may help take out business credit e.g. a credit card or an overdraft. However, it is very important that you ensure all repayments are made on time.
It is important that you file all complete accounts with Companies House on time. Having your accounts audited can help too. All bills and credit cards associated with the business should be paid on time. If you have accounts that are no longer in use, close them. The more you have open, it could be seen that you need all of that credit and weaken your rating.
Finally, try to keep your applications for credit to a minimum. If you get rejected by one, then don’t apply for another straight away. The more applications made, the more desperate you can look and that can have a negative impact on your rating.