{"id":9436,"date":"2022-05-07T11:10:03","date_gmt":"2022-05-07T10:10:03","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=9436"},"modified":"2024-01-30T13:31:32","modified_gmt":"2024-01-30T13:31:32","slug":"setting-up-company-impact-credit-score","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/setting-up-company-impact-credit-score\/","title":{"rendered":"Does setting up a company impact my credit score?"},"content":{"rendered":"<p>Setting up a company will not directly impact your personal credit score. Your company will have its own credit file that is separate and unrelated to yours. However, under certain circumstances, running a company can have an adverse effect on the personal finances of directors and shareholders.<\/p>\n<p>In this post, we\u2019ll begin by explaining why limited companies have their own credit scores. Then we\u2019ll outline the types of situations where setting up a company could indirectly affect your personal finances and credit file.<\/p>\n<h3>Your limited company will have its own credit score<\/h3>\n<p>If you <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/formation-packages\/\" data-wpel-link=\"internal\"><u>set up a limited company<\/u><\/a>, it will be incorporated as a legal \u2018person\u2019 with its own credit score. This means that your company will:<\/p>\n<ul>\n<li>exist independently of you (the shareholder and director)<\/li>\n<li>be able to enter into contracts and open <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/blog\/business-bank-account-company\/\" data-wpel-link=\"internal\"><u>business bank accounts<\/u><\/a> in its own name<\/li>\n<li>have responsibility for its own assets and liabilities (debts)<\/li>\n<li>provide limited liability protection to you and any other shareholders<\/li>\n<\/ul>\n<p>If your company is unable to meet its financial obligations or becomes insolvent, the defaults and insolvency will be recorded on your company\u2019s credit file &#8211; not yours.<\/p>\n<h3>How your limited company may impact your personal credit score<\/h3>\n<p>However, there are some exceptions, whereby running a <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/about-limited-companies\/\" data-wpel-link=\"internal\"><u>limited company<\/u><\/a> can affect your personal credit score. Let\u2019s look at the most common ones.<\/p>\n<h4>1. Personal guarantees<\/h4>\n<p>If you provide a personal guarantee for commercial leases, company loans, or other business liabilities, you would become personally responsible for these financial commitments if the company was unable to repay its debts.<\/p>\n<p>This would have a significant impact on your personal finances and credit score if you were unable to make the repayments. You could end up facing <a href=\"https:\/\/www.gov.uk\/government\/publications\/guide-to-bankruptcy\/guide-to-bankruptcy\" data-wpel-link=\"external\" target=\"_blank\" rel=\"noopener noreferrer\"><u>bankruptcy<\/u><\/a> and lose your home or other personal assets as a result.<\/p>\n<h4>2. Unpaid taxes<\/h4>\n<p>Schedule 13 of the Finance Act 2020 gives HMRC the power to transfer a company\u2019s outstanding tax liability to directors if the company becomes insolvent and cannot pay its tax bills.<\/p>\n<p>This can happen when directors are suspected of <a href=\"https:\/\/www.gov.uk\/guidance\/overview-of-joint-and-several-liability-notices-for-tax-avoidance-tax-evasion-and-repeated-insolvency\" data-wpel-link=\"external\" target=\"_blank\" rel=\"noopener noreferrer\">tax evasion, tax avoidance, and repeated insolvency<\/a> as a way to avoid paying company taxes.<\/p>\n<h4>3. Wrongful trading<\/h4>\n<p>Wrongful trading is a civil offence that relates to the conduct of company directors. Claims of <a href=\"https:\/\/www.crowe.com\/uk\/insights\/what-is-wrongful-trading\" data-wpel-link=\"external\" target=\"_blank\" rel=\"noopener noreferrer\"><u>wrongful trading<\/u><\/a> can be brought against a director who allows a company to continue trading when:<\/p>\n<ul>\n<li>the company is insolvent<\/li>\n<li>they knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent administration or liquidation<\/li>\n<li>they failed to take every reasonable step to minimise the potential loss to creditors<\/li>\n<\/ul>\n<p>If a <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/blog\/the-role-and-responsibilities-of-a-company-director\/\" data-wpel-link=\"internal\"><u>company director<\/u><\/a> is found guilty of wrongful trading, they are generally liable for the company\u2019s debts. In severe cases, directors can be imprisoned.<\/p>\n            <div class=\"names_shortcode\">\n                <a href=\"https:\/\/acn.ionos.co.uk\/aff_c?offer_id=3&amp;aff_id=8964&amp;url_id=309\" data-wpel-link=\"external\" target=\"_blank\" rel=\"noopener noreferrer\">\n                    <img decoding=\"async\" src=\"https:\/\/cdn-brand.s3.eu-west-1.amazonaws.com\/assets\/images\/242634_Domains_Banner-Cooperation_QCF_325x340_UK.png\"\n                        alt=\"FREE .co.uk Domain Name.\"\n                        class=\"names_shortcode-mobile\">\n                    <img decoding=\"async\" src=\"https:\/\/cdn-brand.s3.eu-west-1.amazonaws.com\/assets\/images\/242634_Domains_Banner-Cooperation_QCF_980x150_UK.png\"\n                        alt=\"FREE .co.uk Domain Name.\"\n                        class=\"names_shortcode-desktop\">\n                <\/a>\n            <\/div>\n        \n<h4>4. Fraudulent trading<\/h4>\n<p>Fraudulent trading is even more serious than wrongful trading. It\u2019s a criminal offence based on intent to deceive and defraud creditors and customers whilst knowing that the company is going into liquidation. Examples include:<\/p>\n<ul>\n<li>attempting to maximise the company\u2019s income<\/li>\n<li>disposing of company assets for less than they are worth<\/li>\n<li>continuing to accept supplier credit<\/li>\n<li>borrowing more money in the company name<\/li>\n<li>continuing to take money from customers whilst knowing that orders cannot be fulfilled<\/li>\n<\/ul>\n<p>If a director is found guilty of <a href=\"https:\/\/www.taylor-rose.co.uk\/commercial-advice\/directors-duties\/fraudulent-trading\" data-wpel-link=\"external\" target=\"_blank\" rel=\"noopener noreferrer\">fraudulent trading<\/a>, they may be fined, held personally liable for a substantial proportion of company debts, and even sent to prison.<\/p>\n<h4>5. Company insolvency<\/h4>\n<p>If your company fails to make a profit and is unable to meet its financial obligations, it will become insolvent and enter into administration or liquidation.<\/p>\n<p>As a shareholder and director, you have limited liability for company debts. This means that you only risk losing the money you\u2019ve invested in the business, e.g. paying for shares, startup funds, etc.<\/p>\n                                                    <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/blog\/shareholders-directors-liable-company-debts\/\" class=\"related\" data-wpel-link=\"internal\"><span class=\"related-title\">Are shareholders and directors liable for company debts?<\/span><\/a>\n                    \n<p>However, <a href=\"https:\/\/www.gov.uk\/government\/publications\/options-when-a-company-is-insolvent\/options-when-a-company-is-insolvent\" data-wpel-link=\"external\" target=\"_blank\" rel=\"noopener noreferrer\"><u>company insolvency<\/u><\/a> could have a knock-on effect on your personal finances and credit score if you don\u2019t have other sources of income and you\u2019re unable to meet your own financial commitments as a result of losing the business.<\/p>\n<h3>Final thoughts\u2026<\/h3>\n<p>Limited liability protection is one of the biggest <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/blog\/what-are-the-advantages-of-a-limited-company\/\" data-wpel-link=\"internal\">benefits of company formation<\/a>. As long as you trade responsibly and legally, setting up a company will have no direct impact on your personal credit score.<\/p>\n<p>Hopefully, this post has given you a better understanding of the topic at hand &#8211; why limited companies have their own credit files, and the situations were running a company could indirectly affect your personal finances and credit score.<\/p>\n<p>If you have any questions or need help setting up a company, please contact our team of company formation experts or leave a comment below.<\/p>\n"},"excerpt":{"rendered":"<p>Setting up a company will not directly impact your personal credit score. Your company will have its own credit file that is separate and unrelated to yours. However, under certain circumstances, running a company can have an adverse effect on the personal finances of directors and shareholders. In this post, we\u2019ll begin by explaining why&hellip;<\/p>\n","protected":false},"author":10,"featured_media":9444,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[1239],"tags":[],"class_list":["post-9436","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax-accounting-finance","category-1239","description-off"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.2 (Yoast SEO v24.2) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Does Setting Up a Limited Company Impact My Credit Score? | Quality Company Formations<\/title>\n<meta name=\"description\" content=\"Find out how setting up a limited company may impact your credit score and adversely affect your personal finances.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.qualitycompanyformations.co.uk\/blog\/setting-up-company-impact-credit-score\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Does setting up a company impact my credit score?\" \/>\n<meta property=\"og:description\" content=\"Find out how setting up a limited company may impact your credit score and adversely affect your personal finances.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.qualitycompanyformations.co.uk\/blog\/setting-up-company-impact-credit-score\/\" \/>\n<meta property=\"og:site_name\" content=\"Quality Formations Blog\" \/>\n<meta property=\"article:published_time\" content=\"2022-05-07T10:10:03+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-01-30T13:31:32+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.qualityformationsblog.co.uk\/wp-content\/uploads\/2022\/05\/shutterstock_468821369.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1500\" \/>\n\t<meta property=\"og:image:height\" content=\"750\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Nicholas Campion\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Nicholas Campion\" \/>\n\t<meta name=\"twitter:label2\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Does Setting Up a Limited Company Impact My Credit Score? 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Nick is also Company Secretary for the BSQ Group and all subsidiary brands, an accredited industry leader and a Companies Act 2006 specialist.","jobTitle":"Director, Company Secretarial","url":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/author\/ncampion\/"}]}},"views":7921,"x_categories":"Tax, Accounting &amp; Finance","x_tags":"","x_featured_media":"https:\/\/www.qualityformationsblog.co.uk\/wp-content\/uploads\/2022\/05\/shutterstock_468821369-128x128.jpg","x_featured_media_medium":"https:\/\/www.qualityformationsblog.co.uk\/wp-content\/uploads\/2022\/05\/shutterstock_468821369-600x300.jpg","x_featured_media_large":"https:\/\/www.qualityformationsblog.co.uk\/wp-content\/uploads\/2022\/05\/shutterstock_468821369-600x300.jpg","x_featured_media_original":"https:\/\/www.qualityformationsblog.co.uk\/wp-content\/uploads\/2022\/05\/shutterstock_468821369.jpg","x_date":"7 May 2022","x_author":"Nicholas Campion","x_gravatar":"https:\/\/secure.gravatar.com\/avatar\/f9d97f3c5155446fa41f953ae5f16729?s=96&d=mm&r=g","x_metadata":{"yarpp_meta":{"yarpp_display_for_this_post":0},"_dt_sidebar_position":"right","_dt_sidebar_widgetarea_id":"sidebar_1","_dt_sidebar_hide_on_mobile":"0","_dt_footer_show":"1","_dt_footer_widgetarea_id":"sidebar_2","_dt_footer_hide_on_mobile":"0","_dt_header_title":"enabled","_dt_header_background":"normal","_dt_header_background_below_slideshow":"disabled","_dt_header_transparent_bg_color_scheme":"light","_dt_header_transparent_top_bar_bg_color":"#ffffff","_dt_header_transparent_top_bar_bg_opacity":"25","_dt_header_transparent_bg_color":"#000000","_dt_header_transparent_bg_opacity":"50","_dt_header_disabled_background":"normal","_dt_header_disabled_transparent_bg_color_scheme":"light","_dt_header_disabled_transparent_top_bar_bg_color":"#ffffff","_dt_header_disabled_transparent_top_bar_bg_opacity":"25","_dt_header_disabled_transparent_bg_color":"#000000","_dt_header_disabled_transparent_bg_opacity":"50","_dt_page_overrides_top_margin":"","_dt_page_overrides_bottom_margin":"","_dt_post_options_back_button":"0","_dt_post_options_hide_thumbnail":"0","_dt_post_options_related_mode":"same","_dt_post_options_preview":"normal","_yoast_wpseo_focuskw":"credit score","_yoast_wpseo_linkdex":"74","_yoast_wpseo_content_score":"30","_yoast_wpseo_focuskeywords":"[]","_yoast_wpseo_keywordsynonyms":"[\"impact your credit score, impact my credit score\"]","_yoast_wpseo_estimated_reading_time_minutes":"4","_ez_toc_disabled":"","_ez_toc_insert":"","_ez_toc_heading_levels":[],"_ez_toc_alttext":"","_ez_toc_exclude":"","_yoast_wpseo_title":"Does Setting Up a Limited Company Impact My Credit Score? | Quality Company Formations","_yoast_wpseo_metadesc":"Find out how setting up a limited company may impact your credit score and adversely affect your personal finances.","_thumbnail_id":"9444","views":"7921","_yoast_indexnow_last_ping":"1706621493"},"_links":{"self":[{"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/posts\/9436","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=9436"}],"version-history":[{"count":9,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/posts\/9436\/revisions"}],"predecessor-version":[{"id":9556,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/posts\/9436\/revisions\/9556"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/media\/9444"}],"wp:attachment":[{"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=9436"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=9436"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=9436"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}