If you’re running a business, it can be easy to focus on the business finance money owed to you without giving much thought to your own credit rating for UK SMEs. But having a healthy credit score is vital to keeping your finances in order. Your credit history might be checked in all sorts of situations, such as if you apply for a traditional bank loan or overdraft, apply for a mortgage to buy new business loan premises or consider using best invoice factoring company to regulate your income in UK.
Unfortunately, there are many myths about credit scores and how to boost them, so here we separate the facts from the fabrications to help you rate highly!
Financial firms use one magic formula: MYTH
There’s no such thing as a universal credit rating. Each financial company has its own criteria, so you might find that one firm scores you more highly than another.
You get extra points for being a model customer: MYTH
It sounds surprising, but you don’t always get rewarded for being a reliable customer! This is because financial companies work out credit ratings based on potential profit, not risk. So if you’re the type of customer who always pays your credit card in full or rarely uses it in the first place, you aren’t going to make them much money and they might turn your application down.
Being on the electoral register improves your rating: TRUE
Lenders check the register to make sure you are who you say you are, so get on the register and amend your details if you move.
You’ve got more chance of getting credit by applying to several firms at once: MYTH
Every application you make shows up on your credit report, meaning you might look desperate for cash if several applications show up at once. Stagger your applications and double check the form for careless spelling or numerical errors, which can make a big difference.
Your flatmate’s credit history is taken into account: MYTH
Sharing a house with a flatmate with poor credit history won’t damage your application, as his or her finances won’t be taken into account. However, jointly paid bills might be examined by the lender, so if you live with someone who frequently forgets to pay the water, gas or electricity bill, it might have an impact. It’s better to keep one name on each bill and make sure you pay yours on time.
You can ask for mistakes on your credit report to be amended: TRUE
Whether caused by human error or fraud, mistakes on credit reports are sadly not uncommon and can be horribly costly to the applicant. You have the right to ask to see your credit file and should regularly check yours with a credit check agency (this might cost £2 each time). If a check throws up an error, write to the lender asking them to investigate and correct the information. If they refuse to act, you can ask the financial ombudsman to intervene. If one agency check shows an error, run further checks with a couple of other agencies to see what their reports say about you too.
You can repair poor credit: TRUE
It might not help you obtain credit in the short term, but you can take steps to improve your rating for future applications. If you already have credit, it’s essential not to miss payments, even if you are only paying the minimum each month. If you really can’t pay, explain the situation to the lender and ask for a payment holiday. Don’t apply for any more credit until you’re back on an even keel and cancel any cards you don’t use. A credit-building prepaid card could be a good way of improving your rating but the interest can be higher than standard cards.
Simply Factoring Brokers has business credit solutions to suit all types of industries. To find out more, get in touch on 0845 591 2454.