How Your Credit Score Impacts Your Energy Tariff

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James Longley

Managing Director

min read

You may not consider it, but the relationship between your business credit score and energy tariff is vital for ensuring the best business energy deals. Not only will a bad business credit score affect your company workflow, but it can also determine the range of business energy suppliers you can choose from and what type of business energy deals you can get.

Improving your business credit score will help you save money on your utilities, but what exactly is a business credit score, and why do business energy suppliers check credit scores? In our handy guide, we’ll help you understand how your business credit score affects your energy tariffs, how to improve it, and how to save money on your business energy deals.

What is a business credit score?

A business credit score indicates the creditworthiness of a business. Simply put, it lets organisations know how well your business is performing financially, how reliable you are with paying money back and how suitable you would be to receive further financial credit.

Credit reference agencies use a set of criteria to determine your business credit score. Similarly to personal credit, a business credit score is calculated based on risk. If your company has been struggling, or you have missed or made late payments on loans or credit cards, then this indicates to lenders that you may be a bigger risk and not suitable for future investment.

The business credit score ranges from one to 100; the higher the score, the better the credit rating. If your business has a high credit rating, then this indicates that you are in a strong financial position. With a business credit score of 40 and over, you are likely to get cheaper business energy deals.

What influences your business credit score?

Purchase history and loan repayments aren’t the only things that credit reference agencies look at when calculating business credit scores. There are various other factors that contribute to the overall score. In fact, there are over 800 different variables that are considered when calculating a company’s credit score. This can make it difficult to understand what is damaging your business’ chances of future investment and growth. Don’t worry, we’ve highlighted the main ones that impact your business credit score:

• Payment history. If you’ve made a few late payments on bills or missed them entirely then this can be severely damaging for your business credit score.
• Level of debt. If your debt has stayed the same or increased, then this can be worrying for investors. It may show that your business isn’t performing well enough to earn profit to pay off outstanding balances.
• Size of your business and length of time trading. If you’ve recently started your own small business then, due to the lack of financial history, investors may deem you as more of a risk and start you on a low business credit score. Depending on the size of your business, the company’s structure and length of trading will be evaluated to deem whether you are in a healthy financial position.

Why do business energy suppliers check business credit scores?

If a business credit score is used for financial planning, then why do business energy suppliers check it? Business energy suppliers will check your credit score to secure a payment, if there’s a chance that these payments could default then you may experience higher energy tariffs and miss out on the best deals. The past year has proven that energy prices are on the rise and when used in large quantities, such as for a business, then failure to make utility payments would be detrimental for a business energy supplier.

It’s not just business credit scores that can cause your company to lose out on the best energy deals. Utility companies will also deem some sectors to be higher risk than others. For instance, restaurants that have a history of high turnover of management will cause worry and uncertainty for business energy suppliers, so they may increase the energy tariffs.

If your company has struggled with a low business credit score in the past, you may be wondering if you could find a business energy supplier who doesn’t check credit? There are actually ‘no credit check’ energy companies in the UK; however, due to the way the business gas and electricity contracts work, all suppliers will be able to view the credit history of your business. For the best energy deals for businesses, why not talk to one of our friendly experts who will personally tailor your energy tariff to your business needs?

How does a bad business credit score affect your energy tariff

Having a low business credit score isn’t the end of the world. It just means that, when you are searching for business energy suppliers and energy tariffs, your choices will be limited. Some business energy suppliers won’t accept companies with low credit scores, or some may prevent you from having access to their best business electricity and gas deals.

Does switching business energy suppliers impact credit rating? Switching suppliers won’t impact your business credit score, however a check will be run on your credit history as part of the process, and this may affect it. Although, don’t let this put you off switching business energy suppliers. This is the best way to get the best energy deals. If you’re struggling with switching, then why not get in contact with a utility broker, like us? We’ll work with your company to understand its history and preferences for energy tariffs, then save you time and money by finding you the best energy deals on the market. Interested? Talk to you and see how much you could save.

How to improve your business credit score and get better energy deals

A good business credit score will allow your company to secure the best business energy deals and improve your finances even further. However, there are no quick ways to improve your credit score: it usually takes around six months for your business credit score to improve. With a few simple steps, you’ll improve your business’ financial health and create habits that will ensure growth.

• Pay bills on time. We know bills can be a headache, but you should always endeavour to pay them on time. This will not only improve your business credit score, but also your reputation. If you’re struggling to remember, then Direct Debit payments are an assured way of never missing a payment.
• Register with a credit reference agency. By making your business known to a credit agency, they will be able to help you improve your business credit score as long as you keep up with good financial habits.
• Correct any mistakes. Sometimes mistakes can go unnoticed and they can come back to haunt us. Make sure you check your credit file for any errors, such as payments marked as missed that you definitely know you paid on time. Removing any errors can help boost your business credit score.

By establishing positive financial habits, then your business credit score will improve, and you’ll be able to hunt down the best business energy deals. Want to save even more money on your energy tariffs? Then let us help you. With our team of talented experts, we can help you save money on your business energy. Join the 68,000 other businesses in the UK that we’ve helped save up to 45% on their utility bills.

Frequently asked questions

The energy regulator, Ofgem, will implement a SoLR or “supplier of last resort” if your supplier ceased business.

No, if your supplier ceased business, your supply will not be cut off. This is because you will be given a SoLR or “supplier of last resort” to ensure you have a continuous supply of gas and electricity. Other suppliers will bid to replace the contracts of businesses that have ceased trading and Ofgem will try to get the best possible deal for the customer in these circumstances.

Ofgem will be working on finding your new supplier as quickly as possible. This will be announced on their website within a few days.

Your business contract will now be void and you will immediately be put on an “out of contract” rate which may result in your bills increasing. This will only be the case until a new tariff is agreed.

In regards to domestic customers, the protection of funds paid by non-domestic customers into their accounts “cannot be guaranteed”. Find out more information here.

Depending on your new supplier, you will still need to pay the debt to your new supplier if they have agreed to take on customer debts owed to your old supplier. If this is not the case, you will need to set up a payment plan with your old supplier’s administrators that will get in touch with you.

Businesses that use a smart meter will be appointed a SoLR and will still have access to a continuous supply. Similarly, to traditional meters, Ofgem will quickly find a suitable supplier for the circumstances. If a supplier is appointed but they can’t operate your smart meter in smart mode, it will work as a traditional meter for that time.

Ofgem advises that you should not cancel your direct debit as your new supplier will get in touch to provide further information on direct debit arrangements.