Business credit reports are an indication of how creditworthy your business is and can affect your business's ability to get access to credit.
By Laura Rettie, Personal Finance Journalist.
Company credit reports are one of the ways lenders determine your creditworthiness. Read our handy guide to understand what information is held within your business’s credit report and how it can impact your likelihood of accessing credit.
Similarly to personal credit reports, business credit reports are how lenders assess your business’s creditworthiness and how risky it would be to lend to you.
The terms business credit report and business credit score are often used interchangeably, though technically, they are not the same thing. A company’s credit report is effectively a report of all the information held by credit reference agencies (CRAs) about your business, credit history and financial behaviour.
A company credit score is a numerical value that differs between CRAs, that can be used as a guide to how much risk your business poses as a borrower.
In essence, your business credit report is what determines your company’s credit score.
There are several credit reference agencies in the UK that will collect a business’s information and form a credit report, each using its own scoring system.
Here’s a list of the 5 most common business CRAs in the UK and an overview of their credit scoring systems:
Dun & Bradstreet - D&B are a popular CRA, and their scores are made up of two parts; a score for financial strength and a risk indicator.
The financial strength indicator shows the tangible net worth of a business based on its latest financial accounts.
The financial strength indicator will usually be a letter, or a letter and a number, ranging from H-5A.
An indicator of H would mean that your company’s net worth is below £7999, whereas an indicator of 5A means that a business’s net worth is above £35,000,000.
There are also 4 alternative symbols used in the D&B score in place of the financial strength indicator; these are:
The risk indicator shows the lender’s risk when lending to your company, the risk indicator ranges from 1-4, with 1 being low risk and 4 being high risk.
Experian - Experian are one of the top credit reference agencies; their credit scores range from 0 to 100. Below is an overview of what different scores mean:
Equifax - Equifax is another popular CRA that uses a credit risk score, which ranges from 101-992 - the higher the number, the lower risk the business poses to a lender.
Credit passport - Credit passport’s score has two elements, the first is a letter score, ranging from E to A++, and the second is a percentage score of the probability of default.
Creditsafe - Creditsafe’s business credit scores also range between 1-100, where the lower the credit score, the higher the risk.
A business credit score helps banks and lenders to determine your creditworthiness and how much of a risk you pose as a borrower.
If your business wants to apply for a loan or any other form of credit, your business credit score will not only determine whether you will be approved but also how much you’ll be able to borrow and how much interest your business will have to pay.
One major difference between business and personal credit reports is that anyone is able to view a business credit score, and it’s common for businesses to check the credit scores of suppliers or other businesses before choosing to work with them and signing a contract.
There are a number of factors that affect your company credit rating, including;
If your business credit score isn’t where you need it to be, there are a few things you can do to improve it. These include;
A business credit report holds information about your company and it’s financial history. A company credit report is likely to include;
The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.
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For the most part, your personal credit score and your business’s credit score are completely different, and your personal credit score shouldn’t impact your business credit score directly.
However, in some cases your personal credit score may impact your business’s ability to access credit, especially if your business is new, you’re providing a personal guarantee or your business is a sole proprietorship.
Business credit scores and personal credit scores are very similar in many ways. Personal credit reports show your individual financial history and will impact your ability to access personal credit, such as a mortgage, credit card or a personal loan.
Business credit reports show the financial history of the business, and, similarly to personal credit reports, will impact a business’s ability to access credit, such as business loans and credit cards.
One of the main differences between personal and business credit reports is that whilst personal credit reports are private, anyone can see a business’s credit report, and it’s common for companies, investors or suppliers to check a business’s credit history before dealing with a firm.
There are several online services that allow you to check and monitor the credit score of not only your company, but also of other businesses.
Your company credit rating will differ, depending on what credit reference agency you use, and some of these tools will charge a fee for using their services. It’s a good idea to compare different commercial credit report services using a comparison site like ours.
There’s no hard and fast rule for how often you should check your business credit score, though it’s a good idea to check it quarterly to spot any changes and check for inaccuracies.
