A good credit score is important in business because it helps you quickly and easily get any finance or credit whenever you need it. 

Lenders and credit providers will usually check your credit score when you apply for finance. It’s a score that tells them how much of a credit risk you are, and it’s based on your track record of paying your business bills on time.

You should check your credit rating regularly, and especially before you apply for any finance. You can do that for free via our online business health check or online credit reporting agencies in Australia like Experian, Equifax or Illion. These agencies prepare credit reports for all businesses and individuals across Australia.

What is a good business credit score?

The scoring systems of different credit agencies are slightly different. The table below shows the ratings for Creditor Watch and Equifax, and the equivalent Propell score. While each agency will have their own numbering or lettering system, essentially all scores are ranked from Excellent to Poor in a similar manner.

Grading Creditor Watch Equifax Propell score
Very high A1, A2, A3 833 – 1200 AAA
High B1, B2 726 – 832 AA, A
Good B3, C1 622 – 725 BBB, BB, B
Average C2 521 – 621 CC
Below Average C3 C
Very poor D1, D2,D3 0 – 509 D
Impaired E E
Default F F

The higher your business credit score, the better with any credit reporting agency.

How to improve my business credit score?

If you check your rating and find that there’s room for improvement, there are several ways you can do it, just keep in mind that your business credit score is different to your personal credit score. Any financial products taken out in your personal name will count towards your personal credit rating. So, if you’re trying to increase your business credit rating, be sure the accounts you’re paying are in the business name.

Here are some tips to improve your credit score: 

Paying all your bills in full, on time

One of the main reasons business credit scores aren’t as good as they could be is that you may have made late repayments in the past. Late repayments damage your credit score because they are usually reported to credit reporting agencies who record it against your business credit report, especially if any legal action is involved.

Clearing up any tax debts if you have any

Any debt to the Australian Taxation Office can seriously damage your business’ credit rating. Again, make sure you pay all your business tax obligations in full and on time. This includes taxes like GST, PAYG and company tax.

Creating a healthy debt level

The more debt your business has, the more of a risk you will be perceived as being. This higher risk will be reflected in a lower credit rating.

Try to maintain a healthy level of debt instead of going into too much debt. A general rule of thumb is that your current level of debt should be no more than half of your liquid assets.

Not making multiple, unsuccessful finance applications

Every finance or loan application you make is listed on your credit file and impacts your score. So don’t make the mistake of applying to multiple lenders if you get knocked back. Each rejection will harm your score.

Reducing your business credit limits

This includes your credit limits on bank overdraft facilities and credit cards. Any credit limits that you have will be assessed as being used in full for the purposes of calculating your score, so the lower your limits are, the better.

As you can see, there are plenty of steps you can take to improve your business credit score. Once you do, make sure you maintain it so that you can always get the finance your business needs on the best possible terms and conditions.

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