Companies which secure payment freezes from their lenders during the coronavirus pandemic will not have their credit scores adversely affected, thanks to a landmark agreement between the UK’s leading credit reference agencies.
Experian, Equifax, Creditsafe and Dun & Bradstreet have agreed that there will not be a build-up of arrears on those firms’ credit files, as the payment freeze is an arrangement between the business and the lender. Any reports shared with the credit reference agencies (CRAs) will remain as there were before the freeze took effect.
The deal is designed to protect business credit scores during the agreed timeframe; some credit reference agencies have also launched free services for SMEs to access credit data during the pandemic.
However, if a business falls behind on their payments without agreeing a payment freeze, including cancelling their direct debits, the usual reporting position from lenders will apply.
Experian has also agreed to help minimise the impact on the commercial credit assessment of any company’s application for any Government-backed funding scheme, designed to support their survival through Covid-19.
Under normal circumstances, taking up one of the schemes could be interpreted as a sign of business weakness. Experian hopes that by working with BIPA (the Business Information Providers Association), these measures will be adopted across the wider industry.
Experian chief data officer Jonathan Westley said: “Businesses around the country have been forced to put their growth plans on hold and go into survival mode. It’s vital they get the support they need to survive the pandemic and our industry has an important role to play. The emergency payment freeze for businesses will help them navigate the period when they are most stretched.”
Earlier this month, Experian, Equifax and TransUnion confirmed that consumer credit scores will be protected when people have put in the various “payment holidays” in place.
Payment freezes will not be officially recorded on credit reports and, so long as an agreement is reached, a credit score will not be damaged.