I got refused a business credit card for my limited company even though I’ve go a position balance sheet year on year. What would be the best way to improve my credit score? this is a question we hear a lot so heres some advice.
There’s lots and lots of things coming into a business’ credit score, it’s not just the business and the balance sheet. If your limited company is less than three years old, the chances are the credit company might have even looked at your balance sheet. They’re looking at you as a person. Even if you’re a limited company, they still look at the director’s own credit scores.
One thing we find with a lot of businesses starting out is the directors don’t always have the most positive credit scores, purely because they’ve been working on this new business. They’ve been putting a lot of money into it. They may have missed the odd payment on maybe a phone bill or something. Their credit cards might be stacking up in debt because they’re spending more and more money in the business. That can damage their personal credit score which it makes it very challenging for their limited company then to get a credit card or a loan.
There are providers that will look at supporting new limited companies. They are very good at accepting new limited companies but their interest rates are a lot higher than you’d expect from potentially a personal credit card. But that goes in line with the fact that you’re seen as a bigger risk. So a lot of our clients get letters from companies like Capital on Tap when they first form. Capital on Tap generally watch for companies that are forming and then make an offer. It might be worth getting in touch with someone like that. You do have to pay a slightly higher interest rate than you’d perhaps pay from a more traditional bank’s credit card, for example. But they are a lot more accepting of new businesses, whereas, banks are very risk adverse at the moment.
But the main things is it’s not just your business’ credit score they’re looking at, it’s you as a director. And any of the directors in your business, they’ll also be looking at theirs. So it’s important to work out who’s credit score’s maybe not high enough and causing you to not be able to get the application through. But it’s not just based on your balance sheet, unfortunately. There’s a lot more involved when you’re applying for a credit card for your business.
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