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Is trying to remove a CCJ worth it for a business?

Date: 08/05/2022 | Written By: Karl Hodson

CCJ removal for businesses with poor credit

A poor business credit rating can severely restrict access to borrowing, hinder growth, and even compromise cash flow to the extent that it becomes difficult to trade. County Court Judgments remain on a credit file for six years, which is a considerable period of time to be impeded in this way.

Removing a CCJ is extremely worthwhile for a business; the problem is that it can be a daunting process for business owners due to its complexity. Credit reference agencies hold a variety of information within a business’ credit file, but they don’t necessarily hold the same pieces of information.

Why is it important for a business to remove a CCJ?

County Court Judgments are issued when a business fails to pay a debt that has been proven to exist. CCJs are widely used by creditors as a tool to recover their money, and if a County Court Judgment remains unpaid, the creditor can take further measures to enforce it.

This could include calling in a personal guarantee if one is attached to business borrowing, for example, or applying for a winding-up petition that could ultimately result in business liquidation.

Sometimes incorrect or misleading information can appear within credit files, and unreasonably hamper access to borrowing.

How are business credit ratings calculated?

A business credit rating is calculated using various pieces of information held by the credit reference agencies, including:

  • The business’ payment history
  • How much available credit the business is using – its credit utilisation ratio
  • The number of credit and loan applications made
  • Any payment defaults and/or legal judgments that have been issued to the business

What are the benefits for businesses of removing a CCJ?

Removing a County Court Judgment can rapidly improve a business’ trading capability. It means the business stands a higher chance of being granted credit and other borrowing, which may be the key to long-term growth.

A period of credit repair can begin once a CCJ has been removed. This typically involves using limited lines of credit, perhaps a business credit card or a small loan, and making repayments on time to demonstrate the business can manage its finances.

Checking that the lender is reporting payments to the credit reference agencies is also important. Essentially, lenders use credit files to estimate their risk from sanctioning loans and borrowing, so removing a CCJ can bring immediate and long-lasting benefits for a business.

To find out more about removing a CCJ from your business credit file, visit Lightbulb Credit on Practice Portfolio.

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