- by Ian Finnie on 22/09/2016

Many companies don't realise their credit score has dropped until they are refused credit by a supplier or lending institution.

If your company's score is lower than you expected here's some quick suggestions to help improve the credit score and overall credit rating.

1) File Accounts On Time
Always make sure you file your accounts on time at the CRO; late filing of annual returns or accounts will have a impact on your credit score.

2) When Possible Pay On-Time
Try to avoid making trade credit commitments where you don't think you can meet the repayment dates. Often credit scoring companies can tell if your company is paying its bills late and running up disproportionate short term liabilities. Continuous late payments will have a negative impact on your company's credit score.

3) Optimise Liquidity
Keep inventory levels under control to maximise the liquidity of your current assets; poor liquidity or an over reliance on rapid turnover of inventory will have an adverse impact on your company's credit score.

4) Balance Debt To Equity
If the directors have made loans to the company, consider increasing the capital and converting director's loans to equity; a high debt to equity ratio will count against your company's credit score.

5) Defend or Settle Judgments
If your company is taken to court by a claimant, either settle the claim or defend the claim; don't allow bad debt judgments to be registered against your company by default or this will have a seriously adverse impact on your company's credit score.

6) If Possible Avoid Posting A Loss
If the company is heading for an operating loss, review all of the business overheads and any potentially unprofitable contracts with a view to making cost reductions and efficiencies to minimise and trading losses. Reduced margins won't necessarily adversely impact your company's credit score but significant loses will.

7) Fixed Assets to Shareholder Funds
Make sure investments in fixed assets, such as plant and machinery are proportionate to the size of the owner's investment in the business as measured by shareholders funds; if the proportion of shareholders funds invested in fixed assets is too high, this will count against the company's credit score.

8) Healthy Balance
Aim to maintain a healthy balance between debt and equity; an over reliance on interest bearing forms of capital will adversely affect your company's credit score.

9) Insolvency
If the company has become insolvent and the total shareholders funds will be in deficit, consider approaching creditors with a view to converting debt into equity; insolvency on your company's credit report will most likely count against your company's credit score for a considerable period of time.

10) Engage with your Auditors
Engage with your Auditors during the annual review and make sure they have a satisfactory answer to any questions raised during the audit; make the time for an end of audit review, which should include the text of the Auditor's report; any qualified remarks from the Auditor can have a serious impact on your company's credit score.

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