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Understanding Your Credit Report

A credit report is something we all need to keep an eye on, as it tells businesses and banks how reliable you are as a customer. While everyone has their own personal credit score based on their finances, businesses also have a credit score, and you should make a credit report check a regular part of your business admin.

Why do credit reports matter?

As we mentioned, a credit report reflects how reliable you are when it comes to making payments or repayments on services, goods, or loans. Credit reports matter a great deal to businesses and lenders. Here are just some of the scenarios where your business credit report will be considered:

  • Signing up to any service paid on a continuous basis, i.e., a business phone contract.

  • Taking out a business loan with a bank.

  • Taking out business insurance.

  • Suppliers may give you better payment terms if you have a strong credit report.

Your company’s credit score can be accessed by anyone. This means potential lenders, suppliers, and vendors can all look at your credit score before they decide to work with you.

If you’re a sole trader, lenders will consider your personal credit score. This will not be accessible to customers and vendors. If you have plans to grow, it’s well worth considering a limited company structure so you can start to build a business credit report. Whether personal or professional, a monthly or annual credit report check can help you ensure that you’re in good financial shape.

How is a credit report scored?

A personal credit score can range from 300-850, but a credit report for a business in the UK will rank from 0-100. If you score 0, you are considered high-risk, while 100 would make you a perfect customer who is extremely likely to make on-time payments.

How can I improve my credit score?

There are lots of ways a business can improve their credit report score:

  • File your accounts with HMRC accurately, promptly, and fully.

  • Pay all your business bills on time.

  • Keep Companies House, customers, and suppliers updated with changes to your address or bank accounts, so payments are never delayed.

  • Ask suppliers to share your payment record data with Credit Rating Agencies.

  • Keep a close eye on your credit score so you can address any issues as and when they arise.

  • Look at the credit scores of your future suppliers and vendors. If they start to financially struggle, it will have a knock-on effect.

What is a credit reference agency?

The UK has three credit reference agencies (CRAs):

  • Equifax

  • TransUnion (previously Callcredit)

  • Experian

These agencies hold financial information about your business, helping them produce your credit report. This information may include some or all of the following:

  • How quickly you pay your invoices

  • A list of unpaid accounts

  • Financial statements

  • The age of the business

  • If the business has any County Court Judgments (CCJs), mortgages, or legal notices against it

  • Director information

In short, you want to make sure that your credit report looks as good as the rest of your business, as it’s not hard to request this in-depth report on your business’s financial health. At the very least, you should run an annual credit report check.

How much does it cost to do a credit report check?

Running a check on a business’s credit report usually costs a small fee, around £20. For your own business, you can usually get a free credit report if you sign up to a UK credit score service, though you will likely have to pay an ongoing subscription fee. It’s easier to find a free credit report if you want to know your personal score.

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GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, registration number 597190, for the provision of payment services. GoCardless SAS (23-25 Avenue Mac-Mahon, Paris, 75017, France), an affiliate of GoCardless Ltd (company registration number 834 422 180, R.C.S. PARIS), is authorised by the ACPR (French Prudential Supervision and Resolution Authority), Bank Code (CIB) 17118, for the provision of payment services.