Credit rating factors misunderstood

Just 2 out of 5 financial decision makers in UK SMEs have ever checked the business's credit report, a survey by Experian has found.

Of these, 44% checked their report more than 6 months ago and 'curiosity', rather than wanting to improve their access to credit, was the main reason for doing so.

The survey also found that just 13% were 'completely aware' of the factors that influence their credit score. Only 39% of micro firms, those with 0-9 employees, have checked their credit report.

Many SMEs wrongly thought that certain factors would have an adverse effect on their credit rating:

  • regularly using an overdraft (17%)
  • making employees redundant (9%)
  • having more than 5 credit-card holders in the company (3%).

Similarly, many incorrectly identified criteria they thought could positively influence their rating:

  • a healthy bank balance (49%)
  • paying bills before due date (21%)
  • taking on more employees (5%)
  • moving into bigger premises (2%).

Experian's managing director of SME business, Ade Potts, said:

"A business credit score forms a key part of the decision making process for lenders, service providers and many businesses. Whether a small business is applying for finance with a lender, credit with another business, competing for a supplier contact or simply trying to get a good deal on their business mobile contract, they need to understand that their business credit score will play a role."

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