Company Credit Rating
What is it, How Does it Work, and Can You Change Yours: A Guide for UK Construction Companies
In the UK construction industry, maintaining a strong company credit rating is essential for securing supplier credit, winning contracts, and keeping insurance costs under control.
A poor company credit rating can lead to cash flow issues, rejected loan applications, and higher premiums for essential insurance policies like Public Liability (PL), Employer’s Liability (EL), and Insurance Backed Guarantees (IBGs).
Understanding what affects your company credit rating and how to improve it can help your business stay financially healthy and competitive. This guide explains the key factors influencing your credit score, how to check it, and actionable steps to boost it.
- What is a Credit Rating
- Why is Your Company Credit Rating Important
- How to Check Your Company Credit Rating
- Why Different Credit Reference Agencies May Show Different Ratings
- What Affects Your Credit Rating?
- Common Mistakes That Can Harm Your Credit Rating
- Ways To Improve Your Company Credit Rating
- How to Dispute Errors on Your Credit Report
1. What is a Company Credit Rating?
A company credit rating is a measure of your company’s financial health and creditworthiness. Lenders, suppliers, insurers, and trade partners use it to assess risk when deciding whether to offer credit or business opportunities. It represents your company’s ability to meet financial commitments, based on historical payment behaviour, financial statements, and public records.
Business credit scores in the UK typically range from 0 to 100, with higher scores indicating lower financial risk. A strong credit rating can improve access to better supplier terms, loans, and insurance policies, while a poor score can limit opportunities and increase costs.
Company Credit ratings are calculated based on multiple factors, including:
Business registration details – Whether your company is registered with Companies House.
Credit history – Payment behaviour, outstanding debts, and previous credit arrangements.
Legal records – County Court Judgements (CCJs), bankruptcies, or insolvencies.
Trade credit relationships – Information from suppliers and trade creditors.
Financial stability – Annual accounts, cash flow management, and overall financial health.
2. Why is Your Company Credit Rating Important?
Your credit rating can directly impact your business in the following ways:
Supplier Terms & Trade Credit: Many suppliers and wholesalers check credit ratings before offering credit accounts or flexible payment terms.
Business Loans & Financing: Banks and lenders rely on your credit score to determine loan eligibility, interest rates, and repayment terms.
Insurance Implications: Poor credit increases premiums or makes it harder to obtain essential cover like Public Liability (PL), Employer’s Liability (EL), Insurance Backed Guarantees (IBGs), and other forms of tradesman insurance.
Tendering for Contracts: Large contractors, councils, and commercial developers often check business credit ratings before awarding projects to ensure financial stability.
3. How to Check Your Company Credit Rating
Regularly monitoring your business credit rating helps you manage financial health. In the UK, there are a number of credit reference agencies (CRAs) that provide business credit scores, including:
Experian Business (www.experian.co.uk)
Equifax Business (www.equifax.co.uk)
Creditsafe (www.creditsafe.com)
Dun & Bradstreet (www.dnb.co.uk)
Since CRAs use different scoring methods, reviewing multiple reports offers a more complete picture.
4. Why Different Credit Reference Agencies Show Different Ratings
Credit scores vary across agencies due to differences in data sources and evaluation models. Key factors that cause variations include:
Financial Filings: CRAs obtain financial data from Companies House, but updates and processing times differ.
Payment History: Some agencies prioritise supplier trade credit data, while others focus more on lender-reported transactions.
Legal Records: County Court Judgements (CCJs), bankruptcies, and insolvencies are weighted differently across agencies.
Risk Models: Each CRA has its own algorithm, assigning different levels of importance to financial trends and business history.
5. What Affects Your Company Credit Rating
Several key factors influence your company credit rating:
Business Registration & Structure: Whether your company is registered with Companies House and its operating history.
Financial Filings: Late, incomplete, or inaccurate annual accounts impact your creditworthiness.
Payment History: Consistently paying suppliers, lenders, and service providers on time improves your rating.
Outstanding Debt & Credit Utilisation: High levels of unpaid debt or excessive credit usage can lower your score.
Trade Credit Relationships: A strong history with suppliers who report positive payment behaviour can improve your rating.
Legal History: CCJs, bankruptcies, or insolvency proceedings negatively affect your score.
6. Common Mistakes That Can Harm Your Credit Rating
Avoid these common pitfalls to maintain a strong company credit rating:
Filing late or inaccurate annual accounts.
Frequently applying for credit, which can trigger multiple hard searches.
Regularly changing business addresses or directors, which can indicate instability.
Missing supplier or lender payments, even for small amounts.
Failing to dispute incorrect or outdated information on your credit report.
Allowing partners, customers, or suppliers with poor credit ratings to impact your business’s financial standing.
7. Ways to Improve Your Company Credit Rating
Now you know how a strong credit score can benefit your company, but if your company credit rating is not as strong as you’d like it, can you improve it?
Yes! Over time you can impact your credit rating, here are
Pay Bills & Suppliers Promptly: On-time payments enhance your reputation and improve your score.
Ensure Timely Financial Filings: Submit accurate annual accounts and confirmation statements to Companies House before deadlines.
Reduce Debt Levels: Lower outstanding liabilities to improve your credit utilisation ratio.
Monitor Your Credit Report Regularly: Checking for errors ensures accuracy and allows for timely dispute resolution.
Establish Strong Supplier Relationships: If suppliers report trade credit behaviour to CRAs, maintaining positive relationships can boost your rating.
Limit Credit Applications: Too many credit applications in a short period can signal financial distress. Instead, ask for quotes before applying for finance.
Avoid County Court Judgements (CCJs): If you receive a CCJ, pay it promptly to prevent long-term damage to your credit score.
Keep Business Information Updated: Ensure Companies House, customers, suppliers, and business directories have accurate details to maintain trust and credibility.
8. How to Dispute Errors on Your Credit Report
If you identify incorrect information on your business credit report, follow these steps:
Obtain Your Credit Report from major CRAs.
Identify Errors, such as outdated financial details, incorrect payment records, or misreported CCJs.
Contact the CRA Directly to raise a dispute. Most agencies have online portals for submissions.
Provide Supporting Evidence, such as bank statements, supplier confirmations, or proof of payments.
Follow Up Promptly to ensure the necessary corrections are made.
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