Improve your credit score

When you apply for credit the bank will want to build a picture of your past and current circumstances to help them make their decision. Credit scoring plays a big part in the process.

The benefits of credit scoring, in terms of efficiency in the lending process, are widely recognised. By reducing the time and resources needed to assess the single loan request, credit scoring allows the bank to serve a larger base of micro and SMEs.  However, credit scoring is an impersonal tool that can substantially reduce the relationship between lenders and small businesses and select against those entrepreneurs which have limited credit history, lack collateral and have particular difficulties in presenting financial information.

Lenders look at different areas to build your credit profile, allocating points for each piece of relevant information. Points are then adding together to produce a total score. When your score reaches a certain level, the bank will generally agree to your application.

Payment History
Total amount of debt
Time and Length of credit
Type of finance you already have
Recent loan applications
Age of business
Age of owner
Industry sector, etc.

How to improve your credit score

  1. Make repayments on time and for the required amount.
  2. Stay within your account balance or approved overdraft limit.
  3. Use your business bank account as much as possible to highlight your turnover. (i.e. don’t pay business receipts into your personal bank account)
  4. If you’re looking for a loan, ask lenders for quotations until you find the right deal. Only then should you apply. This minimises the impact on your credit score.
  5. Avoid making several applications over a short period of time. This results in ‘multiple searches’ showing on your credit record, which could adversely affect your credit rating.
  6. Confirm how much capital you need and when you need it by. Then outline any security you can offer, how you will repay loans. You should also estimate cashflow, profit & loss forecasts (ideally with the assumptions they’re based on).

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