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Top tips to improve your business credit rating

Your credit record is one of the most important factors when it comes to accessing finance to start, support and grow your business – so it pays to make sure it reflects your business well. Follow our tips to improve your business credit rating.

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1. Check your credit report

Credit reports are compiled by credit reference agencies based on the information in the public domain about your business. The report is basically a recommendation based on this information as to the likelihood that credit will be repaid on time. You can check your own credit rating by purchasing a credit report. You should regularly review your credit rating to monitor any changes and tackle any problems early on.

2. Correct any mistakes

Even a simple mistake such as an incorrect address can affect your credit history. If you believe that there are mistakes in your report, you can dispute these with the credit agency that compiled it. You may need to provide copies of documentation to support your claim. If they agree, they should quickly change the file, though sometimes you'll need to talk to the company that originally filed the data.

3. Beware County Court Judgements (CCJs)

If you had a CCJ registered against you and paid the amount in full within 28 days of the claim being made, then the judgment will have been cancelled and this shouldn't appear on your record. If you paid the full amount at a later date, you can obtain a letter of confirmation from whoever filed the judgment and deliver it to the County Court.

You can then ask the court to issue you with a certificate of satisfaction or cancellation, which will involve a court fee. The debt will still appear on your record but will be shown as satisfied. Any unpaid CCJs will appear on the register for up to six years.

4. Keep your filing up to date

If yours is a limited company, the credit reference agency will mainly use the documents you file at Companies House to rate you, so you must file regularly and update any changes. Many lenders won't lend to businesses who are incorporated at Companies House but haven't filed accounts. Make sure you meet Companies House deadlines as late filing is often seen as a sign of financial difficulty.

5. Maintain a successful trading track record

If your business is a firm or partnership, you will be judged on different criteria from a private limited company, because the principal(s) are personally liable. In most cases, a successful trading track record and good supplier relationships (see point 12) will help to secure credit.

6. Be prepared to provide information

If yours is not a limited company, you're not legally required to register your financial information with Companies House. Therefore suppliers may ask for information about your finances directly, so be prepared to provide information on interim accounts and trading figures. You can also contact a credit reference agency with information that can improve your credit rating.

7. Get your personal finances in order

If lenders can't find enough information on your company, for example because you're just starting out or are yet to file company accounts, they may look at your personal credit history, so you should treat this with as much care as you would your business accounts. No lender wants to give your business money if they think it will end up clearing your personal finances.

8. Don't rely too heavily on credit

Lenders will be concerned if your business relies largely on credit to finance it. Every time you apply for credit it is noted on your credit report – even if your application was unsuccessful. If you've applied and been rejected several times, your credit history could be getting worse. To ensure that you get paid and your cash flow stays healthy so that you can in turn pay suppliers, it is important that you follow good credit control practices.

9. Know your customers

You should monitor your customers' their accounts and business performance on an ongoing basis. Read our guide to credit checking your customers.

10. Give your customers clear terms and conditions

Before supplying or accepting goods and/or services you need to make sure that you are aware of the conditions to which you are committing the company. For more information read our top tips on terms and conditions.

11. Don't be afraid to chase late payers

You should have a routine system in place for following up non-payment that includes letter, email, and telephone, but be prepared to act more quickly if the amount is large or you are concerned about the customer. For more information read our top tips for preventing and chasing late payment.

12. Pay on time

Paying your suppliers on time is not only good business practice and beneficial for maintaining good relationships with your suppliers, it is also good for your credit rating too as it is based on the likelihood that you will pay your bills on time. Good references from happy suppliers can also help to boost your chances of accessing finance.

Where possible – i.e. bills and regular payments – try to pay by Direct Debit so you don't forget, but always make sure you have enough funds in your account to cover these outgoing amounts.

To find out how the Forum of Private Business can help you manage credit control, call us on 0845 130 1722.