Credit 101

What makes up your business credit score?

Your business credit score is created from a number of different data points each with their own depth and complexity. This includes:

  • Personal credit scores of company directors
  • Company financial data
  • Trade credit and payment performance data
  • Other general company data

Director credit scores

As a director of a limited business how you manage your personal finances and credit is quite often used as an indicator for how your business will also manage its creditors.

credit 101 pound coins

Your personal credit score is created by the credit reference agencies and is used by different organisations to help them assess whether they will provide you with credit cards, loans, mortgages, gas and electricity, mobile phones etc. It’s a mathematical model that predicts how likely it is you will be able to make repayments. In general, a higher credit score means you are seen as a lower risk to lenders, so they are more likely to give you the credit you want.

There are a variety of different factors that go into your personal credit report, for example:

  • How much credit you currently have and how much you’ve paid off
  • Your payment history
  • How many credit applications you’ve made recently (too many applications in a short time can make you seem higher risk)
  • Whether you have any public information records such as being on the electoral roll or CCJs

Business information

Your business credit score is used in exactly the same way as your personal credit score, as a means to assess the risk of your business. Because a business is a less fixed or traceable entity than a person more data points are included to create a business score.

Your business’s financial health is assessed including your submitted financial accounts over time as well as how well you pay your bills, suppliers and also any money you borrow.

credit 101 credit score calculator

The following factors are also taken into consideration:

  • How large your business is (in terms of both employees and turnover)
  • How old your business is
  • What kind of industry/market your business is in (if your business is in a diminishing market, that could increase its credit risk even if its finances are perfectly healthy)

All of this data is blended to create a complex but thorough view of your business which is expressed as your business credit score.

It’s worth noting that each credit bureau uses different criteria and scoring systems, so your business credit score may differ slightly between each bureau but it should be in the same general area.

What does this mean for my business?

A higher business credit score means that your business is more likely to remain solvent and has a stronger track record of paying its bills. From this, lenders, suppliers etc. will have much more confidence in your business.

The suppliers of goods and services will often report back to the credit bureaus about your dealings with them. This means that, although you might not be doing any banking transactions, the bureau will still be aware of whether or not you are paying your bills late or on time.

Why should you care?

Obviously, the main purpose of your business credit score is to help determine how creditworthy your business is. It’s worth remembering though that your business credit score isn’t just used when applying for credit, there are a variety of scenarios where it can play a key role.
credit 101 Handle credit report Say your business is about to strike a deal to start working with a new supplier. It is likely they will have a look at your business credit score as part of their research into your business. If your score is poor the supplier may pull out of the deal because they no longer have as much confidence in the ability of your business to stay solvent.

Similarly, if a larger business is considering a takeover bid of your business, your business credit score is something they will look at. A business with a poor credit score is unlikely to be taken over. Nobody wants to take over a business that’s likely to become insolvent.

Alternatively, if you are already working with a supplier and have a good business credit score, you could use it as leverage to help negotiate better payment terms with them. This could range from lower interest rates to paying on invoice instead of paying part of the bill upfront.

So a good business credit score is now a vital part of how businesses run. It is what should give you confidence to do business with another company, whether that is new business or evolving a current relationship.


We’re always open to questions here at Handle, so if you have any please don’t hesitate to get in touch with us at [email protected].


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