Experian urges SMEs to check their own business credit scores

According to the company, using commercial credit scores enables businesses to manage the risks of not getting paid, losing a vital supplier or becoming a victim of fraud.

An independent survey of over 500 UK SMEs revealed that over half recognise the importance of checking a customer or supplier's commercial credit score, but only 28% think it is important to check their own commercial credit score.

Simon Streat, Experian's head of SME for UK and Ireland, said: "Our analysis has found that 56% of SMEs know it is important to use credit scoring to help them manage some of the financial risks associated with extending credit or a business loan to new customers. However, most do not appreciate the importance of knowing their own commercial credit score or the value they will gain by actively monitoring and managing it."

He continued: "These are tough times for SMEs and the message is very clear. They need to check their credit reports regularly, especially before making an application for credit or a business loan, to ensure that their reports accurately reflect their circumstances."

Experian listed its advice for SMEs on how to build a healthy commercial credit score as:
• Get a copy of your own report and find out what your commercial credit score is.

• Ensure it is an accurate representation of your circumstances. As the report is based on information from third party suppliers, it may highlight lingering issues with your business that you were not aware of or thought had been resolved.

• Pay invoices on time. A worsening payment trend is a key indicator of a deteriorating cash position.

• File annual returns and financial accounts on time. Businesses with poor trading results tend to delay submitting their accounts. Late filing of accounts can be a sign of financial distress.

• Avoid County Court Judgments (CCJ) where possible. However, if one does occur, ensure it is settled within the month. In stable economic conditions the incidence of one CCJ would not necessarily involve the withdrawing of credit lines, but it is more likely to have a greater impact in the current economic climate.

• Owners of small or newly formed businesses should also keep an eye on their own personal finances. In cases where the financial data of a business is scarce, consumer data is a valuable indicator of the business's likely commercial integrity. Subject to consent, lenders are able to consider the personal finances of a business's directors or proprietors in commercial lending decisions, provided the company is independently owned and has fewer than four directors or proprietors.

• Register with a credit reference agency or a directory. Make sure there is enough information about your business available, because if it falls below the radar then you could struggle to gain access to credit and services.