What is a Credit Score?
Your credit score represents the financial health of your business. It is best known for evaluating the risks involved in lending you money. Having a financially healthy business is the key to accessing capital, competitive interest rates, credit terms and insurance premiums. Having a financially healthy business is the key to accessing capital, competitive interest rates, credit terms and insurance premiums. People and companies want to do business with other healthy businesses.
What is the GRID Score?
The GRID Score is our proprietary credit score. It is a standardised metric, between 1-100, that denotes the financial health of your business. Knowing your score as a business owner gives you the power to improve it. You’re only as strong as your weakest link and finding out the area you most struggle with, means you can improve this and bring up your credit rating.
Why Does It Matter?
Your credit score (GRID Score) matters because every day, people and companies are making decisions about your business based on that score. Not only do financial providers, like banks and insurance companies check your score, but so do your suppliers and customers.
What Do They Use Your Credit Score to Determine?
- How much you’re eligible to borrow
- Your capacity to repay a loan
- How much your insurance premium should be
- Your capacity to repay goods or services given in credit
- Before negotiating any credit terms with you
Your Customers & Partners:
- Whether you will be able to deliver your product or service
- Before negotiating any debtor terms with you
- That you will meet obligations
How Do You Improve Your Score?
There are many ways to improve your score, but here are a few tips from our Credit Team:
Try to keep overdrawn balances (that aren’t authorised by your bank) to a minimum. If you are frequently overdrawn on your bank account, it’s a sign that you may be spending more money than you actually have.
This is similar to the above, in that it can indicate that you are spending more than you have. While one or two bounced payments are unlikely to affect your score much, if you are constantly having payments rejected from your account, this can be a strong indicator that you may find it difficult to fund debt.
If possible, you should resolve any judgements as soon as you can. Unresolved judgements reflect badly on your business as they can affect your cash flow and debt further down the line.
Aim to maintain manageable debt levels. Money management is very important when it comes to credit, as it demonstrates that you will be able to meet upcoming repayments.
Annual Returns & Financial Information
It is important to submit your annual returns to the CRO on time. Maintaining a good level of financial information, e.g. aged lists of debtors and creditors, can help the Credit Team to understand your business better.
How Do We Get Your GRID Score?
When you apply for a loan with GRID we will calculate your GRID Score for you. We want you to know and to help you to improve your score, which is why our credit team will explain how to best improve it. On receipt of your loan application we look at several elements to determine your score, as shown in the infographic below.
We hope you now have a better understanding of credit scores and how to go about improving yours. If you want further advice on your credit score feel free to e-mail us at firstname.lastname@example.org or schedule a call with one of our team.