How to Start Building Your Business Credit Rating

Your credit score affects how much it costs you to borrow money. If you want to buy a car, house, or even just pay off some bills, you’ll likely need a loan. But before you go shopping around for one, you’ll want to know what your credit score really looks like. You might think it’s fine, but there are factors outside your control that can lower your score. Here’s how to build up your business credit score.

What is a credit score?

A good credit score is an important part of running a successful small business. Whether it’s buying equipment, financing inventory, or getting loans, having a high credit score helps make those things happen. But how do you know whether your score is high enough to help you succeed? And what does it really mean anyway?

Credit scores are based on three main factors: payment history, debt utilization, and length of credit history. Each factor gets assigned a value, and together they determine your overall score. Here’s what each one means:

Payment History

This category looks at payments you’ve made over the course of several months. If you haven’t paid anything recently, your score will take a hit. This is because people with poor payment histories tend to carry balances on their accounts longer. So, if you don’t pay off your bills regularly, you could end up paying more in interest charges.

Why is it important?

Business owners know that having a good credit history helps them secure financing and save money. But did you know that your credit score impacts much more than just your finances? A strong credit history is key to opening up new opportunities and accessing different types of products. In fact, a poor credit score can even prevent businesses from getting approved for certain kinds of insurance. Here are some things you might not realize about your business credit score.

What affects it?

A CCJ is where you owed money to someone else. You usually pay off the debt within 30 days. If you fail to do so, a collection agency gets involved. This is called a judgment.

Lenders will check your current finances before giving you credit. They want to make sure you can afford the loan.

They don’t trust businesses who ask for loans without having previous experiences. Your lender wants to know what you’ve done in the past.

Suggestions to raise your business’s credit score

Business owners often worry about their personal finances, especially when it comes to paying off debt. But there are ways to boost your business credit score without spending too much time worrying about your personal financial situation. Here are seven things you can do to improve your business credit score. -1. Be aware of what matters most to lenders

Lenders look at a variety of factors when determining whether to approve a loan application. These include your income, assets, liabilities, equity, and history of making payments on loans. They also consider your overall financial health and stability. If you’re having trouble meeting your obligations, lenders might require additional collateral or ask for proof that you’ve taken steps to correct the problem.

-2. Get organized

When it comes to managing your business finances, being organized is key. You’ll want to keep track of everything related to your business — including expenses, cash flow, receivables, payables, bank accounts, tax information, insurance policies, and even employee benefits. Keeping up with all of this paperwork can seem overwhelming, but it’s essential to maintaining control over your business’ finances.

-3. Avoid defaulting on debts

If you fail to pay your bills on time, your lender could report that delinquency to one or more credit reporting agencies. Lenders use this information to determine whether to extend you another loan. If your payment record is spotty, lenders may decide not to give you another chance. In addition, if you’re delinquent on one type of bill, such as rent or mortgage payments, lenders may assume that you won’t be able to meet your obligations on others.

Is there a difference between a corporate and a personal credit score?

A business credit score differs from a personal credit score because it takes into account how well you manage money and pay bills. Your business credit score will include information about your payment history, whether you are paying off loans, and how much debt you carry. This is important because some lenders may consider your business credit score when deciding whether to give you financing. You should check your business credit score periodically to make sure it doesn’t fall too low. If it does, you might want to ask your lender to lower your interest rates.

Business credit scores are typically calculated differently than personal credit scores. For example, your personal credit score includes information like what type of loan you took out and how long you’ve been paying on that loan. But your business credit score won’t include personal information such as your income, assets, debts, or employment status. Instead, it’ll look at things like your payment history, outstanding balances, and types of loans you take out.

Is my personal credit score impacted by a business loan or credit card?

A soft inquiry doesn’t affect your personal credit history, but it does show up in your credit report. A hard inquiry affects your personal credit score.

Soft inquiries are those where you apply for a loan or open a credit card account. These types of inquiries do not impact your personal credit score because they’re not reported to major credit bureaus like Experian, Equifax and TransUnion. You’ll see a soft inquiry on your credit reports if someone applies for a loan or opens a credit card account in your name. If you receive a letter asking about a soft inquiry, ignore it.

Hard inquiries happen when you apply for a loan, rent a car or sign up for utilities. They also include applying for a mortgage, opening a store credit card or getting insurance. All of these actions impact your personal credit score. Hard inquiries will remain on your credit reports for seven years.

If you’ve had a hard inquiry within the last 12 months, it could negatively impact your scores. Your credit score will improve over time, but it might take several months or even longer depending on how long ago the inquiry occurred.

How do you find out your business’s credit rating?

If you’re looking into starting up a small business, it’s important to understand how your personal credit affects your business credit. In fact, there are three different types of credit scores — one for each type of account. Your business credit score measures whether you pay your bills on time, and it helps lenders decide whether you’ll repay loans. Your personal credit score measures your ability to borrow money. And your consumer credit score measures how much debt you carry.

In addition to your credit score, lenders look at several factors when deciding whether to lend you money. These include your income and assets, your employment history, your payment history, and your financial obligations. Lenders use these factors to determine whether you’ll be able to afford to make payments on your loan.

Your credit score doesn’t just affect your borrowing power; it also impacts your interest rates. If you have good credit, you might qualify for lower rates on car loans, mortgages, and even student loans. But if you don’t have good credit, you could end up paying higher interest rates.

The best way to improve your credit score is to keep your accounts current. You can do this by making sure all of your bills are paid on time every month. This includes both your mortgage and auto insurance. If you miss a payment, your lender will likely report that information to credit bureaus. This can negatively impact your credit score.

You can find out what your credit score is by checking your free annual credit reports from each of the three major credit reporting agencies — Experian, Equifax, and TransUnion. You can request a copy of your credit report once per year by contacting the agency directly at 800-EXPERIAN (800-372-3289),, or by calling 877-322-8228.

Here are some tips for improving your credit score:

• Pay off debts on time.

Government-backed schemes

The government has announced several schemes aimed at helping businesses cope with Brexit. These include Business Rate Relief Scheme; Job Retention Scheme; Small Business Loan Guarantee scheme; Self-employed Mortgage Support scheme; and Start up Loans scheme.

Some of these schemes require you repay over a period of time. This could mean that you’ll need to dip into your savings, or borrow again.

Make sure you prioritize repayment of the loan within your cash flow. Just like any other loan. You might want to consider taking out some short term debt to help cover it.

Frequently Asked Questions

Does Funding Options perform a credit check?

Businesses with poor credit ratings often struggle to access loans – even if they meet the criteria. But, thanks to the Covid-19 pandemic, some lenders are offering alternative ways to fund. Here’s how it works…

When applying for a business loan, most lenders require three pieces of information: proof of income, bank statements and a personal guarantee. However, many lenders offer alternatives to the standard form of documentation. For example, Funding Options doesn’t perform a credit check when you enquire about business credit. Instead, it requests permission to search your credit file. This way, no matter what your credit rating is, your lender will know exactly where you stand.

Funding Options also offers a variety of different types of financing for businesses with bad credit. These include secured loans, unsecured loans, overdraft facilities and cash advances. Some lenders will allow you to borrow up to £25,000 while others may limit you to just £5,000.

What’s inside a business credit report?

A business credit report provides important information about your business, including the following:

Business background information

Company financial information

Business credit score and potential risk factor

Summary of banking, trade and collections history

In addition to providing information about your business, a business credit report may contain information about your customers, suppliers, landlords or creditors. This type of information is called “third party data.” Third party data is collected in many different ways, but typically involves collecting personal information about individuals who use your products or services.


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