Business credit card to build the business credit score

[sultanoflondon]

Hi all,

I have heard that businesses have credit scores in the same way that individuals do. Consequently, it may be a good idea for a business to get a credit card in order to improve its credit score. With this in mind, would it be a good idea for me to get a business credit card, even though I don't use it much? I would find a free one and use it very occasionally.

Would appreciate some advice on this. Thank you everyone!

 

[Darren_Ssc]

Probably, yes.

 

[fisicx]

Just having the card will not help your credit score. Even if you use it and pay off the balance there is no benefit. It may be use to verify location on an address check but that's about it.

Source: my wife who does credit checks for her job.

 

[Gordon - Commercial Finance]

Business credit scoring is very, very different to personal credit scoring so no there is little benefit to getting a credit card.

Focus instead on paying bills and invoices on time, building long term debt serviceability into your P&L, and nurturing a strong positive balance sheet.

 

[Darren_Ssc]

Business credit scoring is very, very different to personal credit scoring so no there is little benefit to getting a credit card.

Is there a distinction if the OP is self-employed or LTD company? I am thinking there is but, admittedly, with no evidence to support my view?

The only business credit I have is BT & Barclaycard which have both shown up as 'director' credit searches despite me being just self-employed.

 

[Gordon - Commercial Finance]

Is there a distinction if the OP is self-employed or LTD company? I am thinking there is but, admittedly, with no evidence to support my view?

The only business credit I have is BT & Barclaycard which have both shown up as 'director' credit searches despite me being just self-employed.

There is a distinction yes - as well as business creditworthiness, personal credit is considered for self employed people as business and personal are linked. Credit scoring on the individual then is just as normal. If the OP was self employed, then getting a personal credit card and paying it off etc might help overall.

@fisicx can ask the wife and correct me if I’m wrong? I by no stretch of the imagination know it all!

 

[gpietersz]

For a one man band using a company can personal and business credit scores affect each other?

 

[menetworkjadaltd]

Try and use between 25% of your actual credit limit each month

 

[fisicx]

Information agencies may use all available data. This means your personal finances could be linked to your business finances.

For example a credit check of a business may suggest a director needs looking at. This is code for iffy personal finances.

It has more of an effect on sole traders than limited companies.

 

[Gordon - Commercial Finance]

Absolutely - when I send a proposal to a lender for a limited company they require full personal details of the director. If they have a history of Spongebob, or major defaults etc on their personal credit file, then it matters not how strong their limited company looks.

 

[gpietersz]

Absolutely - when I send a proposal to a lender for a limited company they require full personal details of the director. If they have a history of Spongebob, or major defaults etc on their personal credit file, then it matters not how strong their limited company looks.

Which means people contemplating a Spongebob (and other forms of insolvency) should be be warned that it may affect their personal credit records and futures businesses they are involved in?

It sounds to me that there is no way to make a company insolvent without consequences for those involved in it - which I suppose is to be expected and fair enough.

 

[Gordon - Commercial Finance]

Which means people contemplating a Spongebob (and other forms of insolvency) should be be warned that it may affect their personal credit records and futures businesses they are involved in?

It sounds to me that there is no way to make a company insolvent without consequences for those involved in it - which I suppose is to be expected and fair enough.

Yes and so it should! However a single dissolved business isn’t going to make an impact - it’s when there are multiple dissolutions and an obvious pattern, so the director in question would have to be a prolific Sponge.

 

[gpietersz]

@Gordon - Commercial Finance agreed, its fair, especially if it applies to people who repeatedly have insolvent businesses. Even if they are not doing it deliberately it shows incompetence or some form of dishonesty. Most obviously people who are running scams who keep reappearing with phoenix companies (although they have presumably got enough that ought to be someone else's not to need to borrow).

 

[Gordon - Commercial Finance]

@Gordon - Commercial Finance agreed, its fair, especially if it applies to people who repeatedly have insolvent businesses. Even if they are not doing it deliberately it shows incompetence or some form of dishonesty. Most obviously people who are running scams who keep reappearing with phoenix companies (although they have presumably got enough that ought to be someone else's not to need to borrow).

Yes indeed. Lenders really do know what they’re doing sometimes. I mean, why would they lend money to the company of someone who has a history of wriggling away from lenders?

 

[Mr D]

Which means people contemplating a Spongebob (and other forms of insolvency) should be be warned that it may affect their personal credit records and futures businesses they are involved in?

It sounds to me that there is no way to make a company insolvent without consequences for those involved in it - which I suppose is to be expected and fair enough.

You go from having a good paying job to no job. Pretty much an impact to your credit record over the following few months anyway?
That's what happens when you spongebob a company.

Affecting future business? Besides HMRC maybe asking for a deposit on account for a new vat registration at some point? Can't offhand think of any other affect of future businesses.
As this business is one of those future businesses. There are others.
None affected as yet in almost 4 years.

 

[Mr D]

@Gordon - Commercial Finance agreed, its fair, especially if it applies to people who repeatedly have insolvent businesses. Even if they are not doing it deliberately it shows incompetence or some form of dishonesty. Most obviously people who are running scams who keep reappearing with phoenix companies (although they have presumably got enough that ought to be someone else's not to need to borrow).

The smart ones bypass this by getting someone else to be the director of the business so no link to past failed businesses show up.
Can carry on scamming for quite some time with multiple mugs / relatives / friends willing to pass on any post.

 

[gpietersz]

The smart ones bypass this by getting someone else to be the director of the business so no link to past failed businesses show up.
Can carry on scamming for quite some time with multiple mugs / relatives / friends willing to pass on any post.

So they are scamming their friends and relatives too, in a different way? That is consistent with dodgy types I have come across although I have not really come across that many of these sorts (thankfully) and never dealt with them personally.

 

[gpietersz]

Are there any cost effective ways to see/monitor business credit records.

You can check personal ones free and get monthly updates indefinitely. What I can find for business seems to cost £25/month = £300/year just for Experian (of course even personal are pricey if you get anything more than the bare score from them, but you can get them free from third parties).

 

[Gordon - Commercial Finance]

Are there any cost effective ways to see/monitor business credit records.

You can check personal ones free and get monthly updates indefinitely. What I can find for business seems to cost £25/month = £300/year just for Experian (of course even personal are pricey if you get anything more than the bare score from them, but you can get them free from third parties).

When you say cost effective do you mean free?
£25 a month for Experian would be very cost effective for me...

 

[Bob Morgan]

CASH IS KING!

 

[gpietersz]

£25 a month for Experian would be very cost effective for me

It would be if I had a foreseeable need for credit.

£300/year to know just in case, is expensive.

 

[Gordon - Commercial Finance]

It would be if I had a foreseeable need for credit.

£300/year to know just in case, is expensive.

Absolutely - the reason it is that way is that most people who need to regularly review business credit can justify the cost.

As we had discussed, business credit is more down to accounts, so companies house is a free method of keeping an eye on business credit perhaps?

Are you looking to keep track of your own score?

 

[gpietersz]

Are you looking to keep track of your own score?

Yes. My main concern is something incorrect getting in there (the main motive for checking personal records too).

I just find it comforting to know. I was quite pleased to find out my personal Equifax score is significantly higher than average for my area. What are apparently affluent and financially stable neighbours doing?

 

[Gordon - Commercial Finance]

Yes. My main concern is something incorrect getting in there (the main motive for checking personal records too).

I just find it comforting to know. I was quite pleased to find out my personal Equifax score is significantly higher than average for my area. What are apparently affluent and financially stable neighbours doing?

Send me a PM and I would be happy to run a search for you

 

[gpietersz]

@Gordon - Commercial Finance thanks for the kind offer. Not really worth bothering you with right now because I am so unlikely to need business finance any time in the next year or so.

 

[Darren_Ssc]

Yes. My main concern is something incorrect getting in there (the main motive for checking personal records too).

I just find it comforting to know. I was quite pleased to find out my personal Equifax score is significantly higher than average for my area. What are apparently affluent and financially stable neighbours doing?

I'm guessing you're in the same position as me where much of your business activity doesn't enter the realm of traditional business credit?

Most of stuff I pay for such as hosting, saas and such is billed in advance anyway. I pay my rent on time but my landlady isn't reporting that to anyone.

In the absence of information to the contrary, I'd assume your personal credit file and business credit file to be pretty much the same thing?

What are apparently affluent and financially stable neighbours doing?

Maxing out their credit cards?

 

[Gordon - Commercial Finance]

@Gordon - Commercial Finance thanks for the kind offer. Not really worth bothering you with right now because I am so unlikely to need business finance any time in the next year or so.

Ok - its really no problem would take me 2 mins and I've already paid for the service.
Offer is there if you ever want to run a check.

 

[gpietersz]

@Gordon - Commercial Finance sent PM, thanks.

@Darren_Ssc yes, in a similar position, but the company should have its own reports somewhere. My main concern is to check accuracy.

The most debt the company has ever had prior to getting a bounce back loan was about £900 on the company credit card.