Small or emerging catering equipment businesses could find their ability to raise finance hampered by the personal credit history of their owners, it has been report.
A new study from the British Bankers Association (BBA) has highlighted that the personal credit history of owners is being taken into account when small companies and start-ups are applying for funding, as well as business plans.
According to the BBA report, more than half of all rejected applications for business loans of less than £25,000 are turned down because of credit scores.
Business owners are now being urged to consult lenders and advisers if they fear their personal credit score is impacting applications for finance.
“Without a previous financial track record in business lenders are increasingly looking at the applicant’s personal credit file to help assess a new business loan application”, explained Neil Munroe, external affairs director at online credit information provider Equifax.
“Anyone planning to apply for finance for a business should therefore check their personal credit history, as well as putting together a strong business plan.”
There are a number of factors that can affect someone’s credit score beyond just keeping on top of credit commitments. Having several credit cards with high limits, for instance, can create the impression an individual is financially stretched.
Munroe says a high number of searches on a credit file in a short space of time can also affect a credit score.
“It’s important to ensure that any enquiry searches that might have been undertaken before an application has been made are properly recorded on a credit file,” he says. “Being registered on the electoral roll is also vital for a good credit score.”
Equifax has released a list of top tips for improving a credit score:
– Make sure you are registered on the Electoral Roll.
– If you believe there is any incorrect information on your file contact the credit reference agency that provided the report and you can log a Notice of Dispute. This has to be resolved within 28 days.
– Make sure any accounts you don’t need or use are closed; dormant accounts could affect your credit score.
– Avoid carrying a balance that is more than 30% of your credit limit. Lenders may view this as excessive debt and that you may not be able to keep up with repayments.
– If you have had difficulties keeping up with credit payments in the past but are now on top of them, you can add a Notice of Correction to explain the circumstances.
– If you’ve had a CCJ and it is now settled make sure the settlement is recorded on your credit file.