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Does Your Credit Score Affect Your Business Energy Prices?
When you compare business energy quotes, many factors can affect the rates available to your business. Your location and the size and type of your business play a role. So does the number of employees you have and your typical energy usage.
Your business’ credit score is another important factor. But what is a business credit score, and how does it impact the prices available?
Business Electricity Prices have created this guide to explain the process and how you can make sure your business credit score does not prevent you from securing the best possible energy deals.
What is a business credit score?
A business credit score works a little like the credit score assigned to individuals. Credit reference agencies, such as Experian, calculate ratings based on businesses’ financial history. The rating is assigned to designate a company’s trustworthiness and the level of financial risk they represent. Businesses are ranked from 100 – 0. 100 is the lowest possible risk your company represents, whereas 0 is the highest possible risk.
Your business credit rating is affected by many different actions that your business takes. For example, paying your bills and credit card debt on time, your credit history, and whether you have any unsecured loans all play a role.
How does your business credit score impact your energy prices?
When you enter a contract with a business energy supplier, they will check your credit score. This is because energy retailers want to make sure you will be able to pay your bills, so they don’t end up having to cover the cost.
The lower your business credit score, the riskier your company appears. Energy companies use different calculations to determine the level of risk, but ideally, you want to aim for a score above 50. All energy companies will reference your business credit score in some way, but the decisions they take can differ.
Those with higher credit scores, and therefore considered lower risk, can sometimes access cheaper deals than those without. This will mean the rate you pay for the gas and electricity you use will be lower. If you are considered high risk, energy retailers may limit you to a prepayment tariff. The rates are very high, so this will be expensive for your business. In some cases, energy suppliers may refuse to supply energy to companies with very bad credit ratings.
Having a cheaper energy deal impacts the profitability of your business. The less you pay for your gas and electricity, the better financial position you will be in.
How can I improve my business credit score?
There are several things you can do, but it is dependent on your individual circumstances. For example, some businesses have a low business credit rating because they have not demonstrated that they can pay back a debt. This is sometimes because new businesses have not accrued any debt or paid back any bills. Therefore, the algorithm that is used to calculate your rating can sometimes mark your company as high risk.
In this scenario, acquiring a business credit card, making a few purchases and paying them back on time can lower your risk rating over time.
Some factors that impact your credit score may not be in your power to change. For example, where your business address is located can lower your credit rate. This can happen if your business premises are in an area where companies typically have a bad credit rating.
However, other factors that are in your control, such as County Court Judgements can impact your credit rating, as can late submission of tax returns. It is a good idea to check your business credit score so you are aware of your current rating and can work to improve it.
Should I wait to switch energy supplier until my business credit score is better?
This depends on your circumstances. Generally, we would advise all our business clients to find the cheapest available energy deal. Too many companies in the UK are overpaying for the electricity and gas that they use.
With Business Electricity Prices, you can compare energy prices from our wide range of trusted suppliers. If it’s been a while since you switched suppliers, it’s likely you will find a better deal when comparing.
Our energy experts can offer advice on the best tariff for your business to keep your rates as low as possible. We’ll even be in touch with you towards the end of your contract to ensure you stay on the best deal available.
To find out if you can save by switching business energy, simply our quick energy comparison calculator.
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