Having a good credit score is essential in the current economic climate, your credit score will be checked by Customers, Suppliers and Banks/Lenders, so how can you improve your score?
1. Pay your bills on time – many credit rating agencies (Dun & Bradstreet, Creditsafe, Risk disk to name a few) now collect payment data from your suppliers every month and update your score, often showing days beyond terms (DBT), if you have a dispute with a supplier try to resolve it quickly as it could affect your credit score.
2. Don’t make multiple applications for credit – credit searches by lenders leave footprints on your credit file and could make it look like you have cash flow problems.
3. File your accounts on time – late filing can really hurt your credit score, sometimes it can reduce your score by 50%.
4. Avoid CCJ’s – Getting a judgement against your business even for a small value is extremely damaging to your score.
5. Retain Profit – this increases net worth and shows you are investing in your business.
6. Record Borrowing Terms – in your published accounts and notes makesure you explain the terms and split the loan between short and long term, if all your loans are shown as short term this will damage your score because it will impact on working capital.
7. Review Share Capital – if you have directors loans that you have made to the business and you aren’t expecting repayment in the near future convert them to Share Capital, this will increase net worth.
8. Keep Credit Card Balances below 30% – Its bad for your credit score to max out your business credit card and its also bad to have too many business credit cards, it makes your business appear desparate for cash.
9. Avoid Negative Net Worth – it can wipe out your score.
10. Fix any mistakes – if a credit score is wrong and contains errors speak to the credit agency and get it fixed.
Do you have any tips to share?
steve@bicknells.net
