Business Credit Report Secrets
For many businesses the key to getting a good credit score is to pay your debts on time, service your borrowing and keep within your credit agreements. All pretty standard stuff. The thing most businesses miss is that there are a number of little things which can have an impact on your credit standing.
This means that many businesses are making finance more expensive and more difficult than it needs to be.
Here are a few things to look out for and check.
The standard industrial classification code is used to show what your company does. The 5 digit code can be changed, added to or removed as your business develops.
Where this has an impact on your credit rating is with comparable data.
Credit agencies use comparable data based on what the average performance is across your business sector, this is based on the SIC code. Having an incorrect code will mean your business is not being compared with it’s peers, instead it is being compared to different a industry sector.
The downside is that the trends within sectors is unique. Some businesses operate on volume sales with low margins, others use longer credit terms, trade in cash or trade on invoice.
Having the wrong SIC code can mean your credit rating is reduced. It is also something that very few small companies ever review. The more accurate the SIC code and the more relevant it is the better.
Each credit agency will review the company filings. This means that if accounts are later being filed or the annual return has not been submitted then it will impact your credit rating. Where the accounts are too old then the credit rating will temporarily drop making finance much harder to obtain.
There are other things that can impact that many businesses don’t expect:
- Change of registered address. Businesses that change their registered address will often see their credit rating fall for a period of time. Businesses that move their registered address are statistically more likely to have issues. There are many good reasons why the address changes however when CCJs, formal notices and HMRC all deliver to the registered address you can understand why frequent changes of address cause concern. It is worth bearing in mind if your registered address is changing and you want to raise finance
- Frequent changes of director. This is about stability. The more frequent the changes of director the less stable the business, at least that is the theory. For small businesses that may have between 1-6 directors a single change is a large slice of control and will temporarily lower the credit rating
There are a number of other items that come into the credit rating, these are just a couple of the most commonly missed. Worth bearing in mind when applying for borrowing as it may be worth scheduling or delaying the little things to make a big difference.
By Dave Farmer