What is a business credit score and how can my business improve it?

Les Roberts, Senior Content Manager at Bionic
By Les Roberts, Senior Content Manager

When your business is in its infancy, the last thing you need is another setback when you’re just trying to get it off the ground. That’s why you should pay attention to your credit score.

A business credit score represents more than just your creditworthiness to investors and prospective partners, and a poor credit rating can make approval difficult, but it doesn’t have to be a barrier.

To get your business up and running, our handy guide to improving your business credit score covers everything you need to know — from what can affect your score, why it’s important, and what you can do even with a low score. 

A business owner at a laptop with printed spreadsheets and glasses on a table. Holding a smartphone showing his business credit score is average,

What is a business credit score?

Like personal credit scores, a business credit score is based on your business's financial history. 

Banks and other lenders — like investors — look at your credit score to decide whether you’d be able to make and manage repayments on business loans and investments. 

A business credit score ranges from 0 to 100, with a higher score resulting in higher creditworthiness and indicating that you’d be a low risk to lenders. If you have a business credit score that’s on the lower side, you may find it hard to get credit. 

If you want to take out a business loan, overdraft or any other form of debt, your score will determine factors like:

  • The interest rate
  • How much you can borrow
  • Whether you’ll be approved for the loan 

Unlike personal credit scores, business credit scores are available for anyone to view. So, suppliers, customers and other companies can check it.

What is a good business credit score?

Business credit scores range from zero to 100. The higher the credit score, the better the financial health of your business and the more likely it is to be accepted for credit. A lower score means you might have more difficulty borrowing or the rates you're offered aren't as competitive as those offered to businesses with a higher score.

The table below explains what the different credit scores mean for businesses:

Credit scoreWhat it means
0Bad - Failed company
1Bad - Imminently failing company
2 - 15Bad - Maximum risk
16 - 25Bad - High Risk
26 - 50Average - Above-average risk
51 - 80Good - Below-average risk
81-90Very good - Low Risk
91 - 100Excellent - Very low risk

Note: Figures above are based upon the Experian business credit score model.

Why is a good credit score important?

Just as boosting your personal credit score can help you secure a good deal on a mortgage for your dream home, a high business credit score can help your business achieve its goals and take it to the next level. 

Having a good business credit score can also save you money in the long term as it gives you access to loans with lower interest rates. 

What can affect my business credit score?

A combination of factors can affect your business credit score, but there are some common issues that can that most businesses will find. 

1. Late payment of bills

One of the most obvious and influential factors to business credit scores is the late payment of bills. This doesn’t just apply to utility bills, it also includes invoices and other money that you may have borrowed and are repaying in instalments. 

If you continuously make late payments — or just miss them completely — it will have a negative impact on your score.

2. The number of times you’ve applied for credit

There’s no limit on the number of times that you can apply for credit, but the more you apply and are rejected, the lower your credit score will be. 

3. Exceeding overdraft limits

An overdraft will appear on your credit rating as debt, so this means lenders will be able to see if you have an overdraft, what the limit is and how much of your overdraft you’re using. 

If you continually exceed your overdraft limits or miss payments, it can damage your credit rating as this can highlight to lenders that your business may be struggling financially. 

4. Too many credit checks

There are two different types of credit checks:

  • A soft credit check is an initial look at certain information on your credit report. Crucially, soft credit checks aren’t visible to companies, so they have no impact on your credit score or any applications you may make for credit. Only your business can see them on your report. 
  • A hard credit check happens when a company makes a total search of your credit report. Every hard check is recorded on your record, so any company that searches will be able to see that you’ve applied for credit, when you applied and the total.

Too many hard credit checks in a short space of time may make lenders think that you’re in financial trouble. If you apply for credit, the company you apply to will do a hard check of your credit report to see if you’d be a good candidate for its credit option. 

How can I improve my credit score?

There are lots of simple ways that you can improve your credit rating to help steer your business in the right direction.  

1. Pay bills on time

One of the best and easiest ways to improve your credit score is to make sure that any bills and invoices are paid on time. Make sure to keep track of all your credit repayments to avoid negatively impacting your credit rating. 

2. Make sure your personal finances are healthy

Although your personal and business credit ratings tend to remain separate, some types of credit reference agencies will look at both — this is known as a blended score. 

If you’ve applied for too many failed loans in the past and your credit score is low, having a strong personal rating could make you a good candidate to borrow money from lenders.

If you need a start-up loan and you have little financial information available, lenders may look at and use the data from your personal accounts to calculate your business credit score. 

3. Only apply for credit when you absolutely need to

It can be tempting to explore the wide range of finance options available to your business, but making too many applications in a short space of time will result in ‘footprints’. These footprints can often be known as multiple searches and can trigger a credit search on your business.

When you’re enquiring about finance, ask for a quote rather than submitting an application so it won’t appear on your credit report.

4. Properly demonstrate your turnover

By using your business bank account regularly over a long period of time, you can prove to lenders your annual turnover, increasing your chances of being accepted for a loan. Find out how to choose and set up a business bank account with our guide.

5. Always have enough in your account

It may seem self-explanatory but make sure that you have enough money in your business bank account, or an approved overdraft limit, to cover any payments that you’re due to make. 

These payments will usually be:

  • Standing orders
  • Direct debits
  • Online payments
  • Cheques
  • Debit card payments

6. File full accounts

If you’re a limited company, you should make sure that you file full rather than abbreviated accounts to Companies House. 

Make sure that you file your accounts before the deadline, as filing late can suggest to lenders that you’re struggling financially. 

Find out more about filing your company's tax returns with our guide. 

What are my options if I have poor credit?

If you do have poor credit, there’s no need to fear. As well as working toward improving your credit score, you can also look into other debt options and equity finance. 

Other debt options

As well as overdrafts and business loans, consider leasing and hire purchase loans, too. Although these loans will still require a credit check, they aim to help businesses acquire machinery, equipment and vehicles to keep them moving. You can also refinance and consolidate business debt as a way to keep your repayments down.

Equity finance

Equity finance takes many different forms and if your business is ready for more investment, then it may be for you.

Angel investors will invest their own money in new startups that have yet to establish themselves. Unlike other investors who focus on profit, angel investors know that companies have the potential to fail, so they’re even more determined for your business to succeed as it’s their own money on the line. 

To find out more about equity finance options, check out our guide to finding the right investor for your small business

How can I check my credit score?

In the UK, you can access your business credit score for free from many CRAs. There are some exceptions where you may have to pay for access to a breakdown report or if you’re wanting to monitor your credit score over time. 

1. Experian

If you’re looking for a detailed insight into your business's financial performance, Experian’s My Business Profile subscription is ideal for small businesses. 

You can manage your credit score in real-time, deep dive into the top 5 factors that are impacting your credit score and much more. 

To sign up for their credit score services, you need to be a registered director or owner of the business. 

2. Creditsafe

If you’re a registered director of the business, you can request a free credit report from Creditsafe that’ll include:

  • Business verification
  • Your credit score and its maximum recommended credit limits
  • Key risk indicators
  • Company information 

You can also request a customised solution for your business that will detail the best tools to get your business back on track.

3. Credit Passport

Another free service that you can run to check your business credit score is Credit Passport. Its checks are usually considered a soft inquiry, so there’s no need to worry about it impacting your credit profile.

The platform uses bank data to show how the financial system views your business. All of the reports that Credit Passport produces are authorised and regulated by the Financial Conduct Authority (FCA).

Credit Passport also offers a subscription plan for £20 per month that offers insights to increase your financial resilience and steps to get your finance back on track before it’s too late.

4. Equifax

Similar to Experian, Equifax allows you to order a single business credit report via their website. The first 30 days are free and then it’s £7.95 per month. Its report includes information on: 

  • Credit summary
  • Public record details
  • Company profile
  • Business risk score

If you’re a company secretary, a director of a limited company, a business owner or a partner, you can request the business report. 

Can I still take out a loan with bad credit?

Yes, it is possible to take out a business loan with bad credit, although it will be much harder to be approved. 

Bad credit is when a business is predicted to be unable to repay the debt on time and in full, based on its previous history of debt repayments. 

Those who are searching for loans with poor credit may be offered them at higher interest rates. If you’re looking to secure a start-up business loan with bad credit, it can be particularly tricky as small businesses are already viewed as risky by lenders. 

For more information, check out our in-depth guide on applying for finance on bad credit.

Cutting your business costs with Bionic

If you're looking to cut your business costs to free up some cash, the team at Bionic can help. We'll compare a range of business essentials, including business energy, business insurance, phone and broadband.  If you need finance to help with anything from cash flow to expansion, we can also compare business finance options with the team at Think Business Loans.