Whilst it’s not uncommon in the national media to see how credit ratings affect banks and other large businesses (http://www.bbc.co.uk/news/uk-scotland-scotland-business-24856832), it’s also worth bearing in mind that companies of all sizes can benefit from having a good credit record. The way in which we do business is heavily reliant on credit, and firms might often need to rely on loans in order to make bulk purchases or obtain materials, to name but two examples. Some firms may simply benefit from the peace of mind that having an exemplary credit rating can bring – after all, it’s possible to check the current credit scores of practically all UK businesses online, and statistics suggest that both consumers and business-to-business clients are more likely to use the services of a company with a good credit score.
With that in mind, this article intends to take an in-depth look at precisely what a credit score is, and how a positive credit rating can set you on the path to long-term business success.
What is a credit rating?
The majority of UK-based businesses have credit ratings kept on file at one or more of the major credit reference agencies. These ratings are worked out based on certain criteria, including the ability of a firm to pay back credit in a timely fashion, whether the business has any outstanding debts, and how frequently it makes brand new credit applications. Although certain criteria may vary dependent on the reference agency involved, these main factors tend to remain the same across the board. Credit is essentially money borrowed under the promise that it will be paid back within a certain time frame, and these reference agencies provide lenders with an insight into how likely it is that a business will remain good on their promise to pay back in full and on time.
Why is a good credit score paramount to good business?
On an individual level, a good credit score allows a person to obtain higher levels of credit at more attractive rates. Whilst this is also true for businesses, there are a number of other factors to take into account when it comes to your company credit rating.
Cash-flow is one of the biggest bugbears of modern business, which is why credit is so important. For example, a retailer or manufacturer could theoretically require extensive refurbishments to their business premises, whilst lacking the necessary funds to make an upfront payment. Should the business suffer from a poor credit history, they may struggle to find a firm willing to undertake the task of refurbishing the premises, leaving them unable to trade, unable to pay for repairs and at risk of facing closure.
As a proprietor, how do I improve my credit score?
Ultimately, awareness of your current credit rating is the first step to making improvements. It’s possible to obtain a copy of your company credit score at http://www.creditexpert.co.uk on a 30 day trial basis, which provides a multitude of information, including your current score (which can range from anywhere between 0-999), and an in-depth analysis of your credit history – both of which provide the insight needed to start making changes which can impact upon your business for the better.