Credit scoring
Your credit rating, whether as a sole trader or a limited company, is crucial in determining your energy supply options and rates. Energy suppliers assess your credit score to evaluate the risk of payment default, which affects the price you pay.
All suppliers conduct credit checks and have established strict, non-negotiable parameters for securing a contract, applicable to all customers.
Many suppliers require a minimum Experian credit score of 26. Customers below this threshold will have limited access to market options.
The Experian business credit score rating scale is as follows;
- 100–76: Low risk of delinquent or defaulted payment
- 75–51: Low to medium risk of delinquent or defaulted payments
- 50–26: Medium risk of delinquent or defaulted payments
- 25–11: Medium to high risk of delinquent or defaulted payments
- 10–1: High risk of delinquent or defaulted payments
An Experian business score of 76 or higher is generally considered to be good.
Customers with a maximum risk credit status face even greater challenges, as only a handful of suppliers are willing to consider offering them a contract.
Moreover, certain sectors have been excluded by multiple suppliers, further restricting the available choices for businesses in those industries.
If you have a poor credit history, we are committed to finding the best possible deal for you. However, please understand that the options may be limited due to your credit history.
Improving your business credit rating
Improving your business credit rating involves various actions.
Max Firth, Managing Director of Experian’s Business Information Services, offers the following advice on enhancing the credit rating of your business;
Check your personal credit score
Firstly, it’s crucial to be credit-aware by regularly checking your own personal credit score. This assessment provides insights into how other businesses perceive your financial health, and addressing any lingering issues is vital.
Monitoring personal credit scores alongside the business’s finances is essential, particularly for micro or newly formed businesses.
Ensure all official data is complete and accurate
Lack of detailed data or incomplete and inaccurate information can lead to low scores, so filing comprehensive accounts with Companies House contributes to a more accurate credit profile. Factors such as location changes, transition to limited status, and mergers/acquisitions also impact credit scores.
Consumer data can serve as an indicator of commercial integrity when financial data for the business is limited.
Register with a credit reference agency or business directory
Registering with a credit reference agency or business directory helps ensure your business remains visible to credit evaluators. Failure to be on their radar can impede access to credit and services.
Proactively engaging with credit reference agencies equips businesses to take action in boosting their credit score and improving external perceptions. Regular monitoring of the credit score is important to ensure it accurately reflects the business’s situation and to address any highlighted issues promptly. Failing to check the credit score may result in missed opportunities, such as lost contracts, supplier refusals, or finance rejections.
Please don’t be afraid to liaise with the credit reference agencies because the information they provide may be very helpful for you.
File accounts on time
Timely filing of accounts with Companies House is crucial, as late filing suggests a struggling business.
Pay invoices on time
Paying invoices on time is another key indicator of financial stability.
Make sure you have the correct SIC
The Standard Industrial Classification (SIC) is important in determining the risk of a limited company for suppliers. Please see below for more information about the SIC.
Conclusion
Credit ratings are very important when it comes to getting the best deal.
A poor credit rating or being in a high-risk industry can limit your choices for energy suppliers and tariffs. Some suppliers may refuse service to businesses with a low credit history or score, while others may impose additional costs, request a security deposit, mandate Direct Debit payments, or install a pre-payment meter.
You can improve your score by regularly checking your credit file and making improvements by ensuring that you ensure all official data is complete and accurate, register with the credit reference agency or business directory to improve your visibility, file accounts on time, pay invoices on time and ensure your company has the correct SIC code.
Comparing energy prices from multiple suppliers is recommended, but it’s important to inform them about your credit situation to receive accurate quotes.