June 24, 2024


The Finance Effect

How to Build a Strong Credit Record and Rating for Your Business

Having a healthy credit record and rating for your business is absolutely vital in these difficult economic times where the amount of money available to borrow is in short supply. Being able to prove that your business is able to pay its financial commitments is imperative when banks are making lending decisions. It is also important to remember that it is not just banks who lend money – every time you (or a supplier) extend credit they are effectively lending money and you need to be sure that if you extend credit to anyone that you will get paid.

The importance of having a strong credit record and rating

Companies understand that company credit reports are available on every registered company and these are readily available from credit rating agencies. Company credit reports are based on a variety of factors which are used to build a credit profile of a business.

Company credit reports will typically include a rating – A credit rating will typically take into account accounting factors such as whether there are any County Court Judgements (CCJs) recorded against the company, the length of time the company has been in operation and the background of its directors.

Also typically included in company credit reports will be information that can be used to build up a picture of their financial stability. Some agencies have started working with telecoms and utilities companies to build up payment data to show if the company can a) afford to pay and b) how quickly they will pay.

So let’s now have a look at some methods you can employ to help build a good credit rating:

1.Complete your report and accounts and ensure they are delivered to Companies House on time

Research completed by a leading Credit Referencing Agency shows that companies who submit their accounts to Companies House in the last possible month are 8 times more likely to go into liquidation than those who file their accounts early. Filing your accounts on time and in full, shows credit rating agencies that you have nothing to hide – transparency is king! It isn’t to say that a business that doesn’t file until the last minute will enter insolvency, it’s just statistically proven that this more likely to happen. Also by being completely transparent you may even see an increase in your company credit rating on your company credit report.

2.Pay your bills on time

Ensuring your company has enough cashflow is a major issue. However by holding back and not paying bills on time sends out warning messages that your business is in financial trouble and at risk of going out of business. Credit rating agencies are constantly building up payment data from third party sources and using this information in their reports. If you haven’t done so already, consider restructuring your payment policy so that all payments are made by direct debit.

3.Pay suppliers within agreed timescales

This doesn’t mean you have to pay your suppliers in advance or even within 14 days, but it does mean that you should set up realistic payment terms with your suppliers and stick to them! A credit rating agency may not use this information within their rating algorithm however they may show this information on their reports.

4.Check your own group’s credit records carefully

Remember it’s not just your report that companies can see when they view your report. Many credit rating agencies will now show the records of other organisations within your organisation’s group or your parent company. Whilst these records may not directly affect your company credit rating it could have an impact on the person reviewing your company group as a whole.

5.Check out your existing and potential customers

In order to ensure a healthy credit record for your own company it is important that you are dealing with companies that are able to pay for any products / services they order. Many business owners do not feel the need to credit check their existing clients due to long standing relationships or the thought that the company is too big to fail – however the recession has shown how quickly this can change.

6.Take account of security threats

Shaking off a poor credit rating can take a long time even if it was caused by fraudsters and not your own business practices. As such it is important that you keep an eye on your company details (that are registered at Companies House) to ensure that no-one has attempted to change your details (a common practice amongst fraudsters).

7.Co-operate with your auditors

Being completely open and honest with your auditors is always a good idea as it shows full transparency of your financial records. Having positive comments from independent auditors can have a positive effect on your credit rating. Trying to hide information or not being completely honest will usually lead to a negative comment which in turn can lead to a negative effect on your rating.

8.Check your own record on a regular basis

It is vital to keep an eye on your company credit report and check this on a regular basis. By checking it regularly you can ensure that any old information is updated thus updating your credit rating.


Company credit reports are playing an increasingly important part in business today. Available online, they are both low-cost and high quality. Since more and more businesses decisions are based on information within credit reports, it makes sense to actively build a healthy record.