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What is a business credit score and how you can improve it?
A strong business credit score can help you secure better borrowing rates and attract new clients. But what exactly is it – and how can you improve it?
Lenders check your business credit score to assess how well you manage money and repay debts. A higher score can unlock lower rates, bigger credit limits and more options. A lower score makes borrowing more difficult and can impact your business’s reputation. Here, we break down what a business credit score is, how it’s calculated and the steps you can take to improve it.
At a glance
A business credit score reflects how well your business manages credit and repayments, helping lenders assess risk
Factors such as payment history, credit use and legal records impact the score
Improving your score involves paying bills on time, reducing credit use and building a solid credit history
Find the right credit card for your business
What is a business credit score?
A business credit score works a lot like a personal credit score. Credit reference agencies hold the score, and lenders, suppliers, insurers and landlords use it to assess risk before offering credit, finance or partnerships.
Your score can change frequently and depends on how your business manages its finances. Each agency calculates it differently, but most consider the same core factors:
Payments – Do you pay off what you borrow on time or do you miss payments?
Credit use – How much of your available credit do you use regularly?
Borrowing history – Do you have a consistent track record of responsible borrowing or do you have no borrowing history?
Public financial records - Bankruptcies, court judgments or debt collections can lower your score
Is a business credit score different from a personal credit score?
A business credit score is different from a personal credit score. Here’s a comparison of the key differences:
Personal credit score
What it measures – Individual, personal borrowing
Privacy rules – Third parties need your permission to access it
How it’s calculated – Focuses on personal borrowing, such as loans, credit cards and mortgages
Legal responsibility – Tied to you personally
Business credit score
What it measures – Company borrowing
Privacy rules – Suppliers, lenders, insurers or anyone with a legitimate interest can check it
How it’s calculated – Considers factors such as supplier payments, business credit repayments and industry risk
Legal responsibility – Tied to the company unless you’ve provided a personal guarantee
If you're a sole trader, lenders may also check your personal credit score. Keep both personal and business scores in good shape to access better finance deals.
What affects your business credit score?
Several factors can affect your business credit score. Here are the main ones to watch:
Payment history Late payments to suppliers, lenders or service providers can lower your score. Prompt payments can improve it.
Credit use Using most of your available credit can lower your score, because lenders may view it as a sign that you’re relying too much on credit.
Credit history A longer record of responsible borrowing can positively affect your business credit score, while new businesses with limited history might find their score is negatively affected in the early days.
Public records County court judgments (CCJs), bankruptcies and debt collections can significantly damage your score.
Company size and industry Some agencies consider business size and how risky your sector is. For example, a well-established IT firm might seem more stable than a new construction business, which lenders may view as higher risk.
Credit mix and number of accounts Consistently relying on one type of credit or allowing your accounts to go unused for months can negatively affect your business credit score.
How can you check your credit score?
You can check your business credit score through several credit reference agencies. The main ones are Experian, Equifax, Dun & Bradstreet, Creditsafe and Company Check. Each agency works differently, with some offering subscriptions or one-off fees for reports, while others provide free trials.
You can check your business credit score as often as you like without affecting it.
How to improve your business credit score
Whether you're starting out or established, a good credit score reflects well on your business. Here are five ways you can improve it:
1. Pay your bills on time
Paying your bills on time builds a positive payment history, while late payments can damage your score. Set reminders or automate payments with direct debits or standing orders to avoid missing deadlines.
2. Reduce your credit use
Maxing out credit limits can lower your score, so try to use only a small portion of your credit and ideally keep your use below 30% of the total amount you have available.
3. Monitor your credit reports regularly
Regularly check your credit reports for errors or inaccuracies. Dispute any mistakes with the credit reference agency or lender to ensure they don’t negatively impact your score.
4. Build a solid credit history
Establishing a strong credit history helps boost your score. Start by taking on small, manageable loans or lines of credit, and repaying them responsibly.
5. Avoid public records or legal issues
Bankruptcies, county court judgments or other legal issues can severely damage your score. Stay on top of your business’s legal obligations to avoid any negative records.
Can I get a business credit card with a bad credit score?
Getting a business credit card with a bad business credit score can be difficult, but it’s still possible. You may face higher interest rates or lower credit limits, and there’s also a chance the lender may reject your application if your score is particularly bad.
There are options available, though. Some lenders may consider your business’s cash flow or personal credit history. Some even offer specialised credit cards that are specifically designed for businesses with lower credit scores.
Will getting a business loan or credit card affect my personal credit score?
Getting a business loan or credit card can affect your personal credit score, especially if you’re a sole trader with a limited business borrowing history. If you miss payments or default on the debt, it can impact your personal credit score, particularly if the credit agreement states you're personally liable. However, if your business is a separate legal entity, such as a limited company, your personal credit score should remain unaffected unless you’ve personally guaranteed the finance.