Your credit rating and credit limit largely determine how suppliers, partners and financial institutions view your business. A good score means better payment terms, lower financing costs and a stronger competitive position. But let's make one thing clear right away: there are no secret tricks or quick hacks to drastically improve your credit rating. What does work? A structured approach based on reliable data and financially healthy behaviour.
What determines your credit rating and credit limit?
Dun & Bradstreet (D&B) assesses companies based on several indicators, including:
- D&B Failure Score โ Predicts the likelihood of a company going bankrupt within 12 months. This is determined by factors such as financial stability, payment history and legal issues.
- D&B Rating โ Indicates creditworthiness and financial strength of a company. It is calculated based on equity and historical performance.
- D&B Paydex โ Measures a company's payment history. A high score means that a company pays on time (or even earlier), while a low score indicates late payments.
- D&B Maximum Credit Recommendation โ Recommends the maximum amount of credit a business should be able to carry without an increased risk of non-payment.
Do you want a higher credit limit and a better rating? Then you must ensure that these factors are positively influenced. This requires a combination of financially responsible policies, timely payments and a proactive attitude in managing your business data. Do you want a higher credit limit and a better rating? Then you need to make sure these factors are positively influenced.
Interesting read: D&B Rating & Scores
3 practical steps to improve your credit rating
1. Pay invoices on time (or preferably sooner!)
Your payment history is one of the most important factors in your credit rating. Credit rating agencies look not only at whether you pay, but more importantly, when you pay. Companies that consistently pay after the agreed-upon deadline quickly get a lower D&B Paydex score, which can result in a lower credit limit.
What can you do?
- Automate your creditmanagement so invoices are processed instantly.
- Set payment reminders for due dates to prevent late payment of invoices.
- Pay earlier than the agreed due date to build a positive payment history.
A company with a Paydex score of 80 or higher is considered a reliable payer. But do you really want to get an advantage? Aim for a score above 80 by paying invoices before the due date.
2. Keep your financial records up-to-date
Many companies underestimate the importance of submitting financial information in a timely and complete manner. Credit rating agencies base their ratings in part on a company's financial reports. If this information is missing or outdated, it can result in a lower rating or even an undetermined risk score.
What can you do?
- Make sure your annual figures and financial reports are filed on time with the Chamber of Commerce and other agencies.
- Minimize debt and ensure a healthy balance between assets and liabilities.
- Avoid negative equity positions, as this is considered a red flag.
Transparent and healthy accounting gives credit rating agencies confidence that your business is financially stable and low risk.
3. Manage your corporate structure and parent-subsidiary relationships well
Credit rating agencies look not only at your individual company, but also at the broader corporate structure of which you are a part. If you are a subsidiary of a company with a bad credit rating, that can have a negative impact on your own rating.
What can you do?
- Analyze your corporate culture and assess how parent or subsidiary companies are performing.
- Implement improvements at weaker links within the group.
- If your company is part of a larger holding company, make sure that holding company remains financially healthy.
A poor credit rating of an affiliated company can affect your score. By improving financial performance within the group, you can avoid being pulled into a negative rating.
No quick fixes, but strategic improvement
Improving your credit rating is not a matter of a quick trick, but of consistent financially responsible behaviour. By making timely payments, keeping your financial records in order and actively managing your credit profile, you will build a solid reputation that will help you achieve better financing terms and growth opportunities.
Interesting read: D&B Data & Scores guide
