This guide outlines how closing a company can impact on your credit score, and what to do.
Closing a company can take place in a wide range of different scenarios. For example, if you and the other directors are looking to retire, you’ll need to go through a very different process compared to if you are no longer able to repay your creditors.
In many of those situations, you will likely be wondering what effect — if any — closing a company will have on your credit score. If this sounds like a familiar concern, then read on for some more information on the topic.
Closing a company: credit impact
When assessing the impact that closing down a company will have on your credit score, it’s important to note that you might be seeking credit in two distinct capacities.
Personal credit score
In most situations for closing a company, the financial health of your company should not have a negative impact on your own personal credit score. This is one of the main points of using legal structures such as LLCs – as long as you carry out your role in a reasonable, legally compliant manner, any losses connected to the company are separate from those in your personal life, as the two remain different legal entities.
Directors credit
If, however, you’re seeking credit as a director, perhaps at a new company, then it’s very possible that the credit reference agency will look into your professional history and identify previous companies you worked at.
If one of those companies closed through a process of liquidation, it could have a negative impact on how much they’re willing to lend you. It’s always worth speaking with an insolvency specialist such as Chamberlain & Co in these situations, so that they can advise you on the best course of action.
How long can closing a company impact credit ratings?
In general, issues such as insolvency and credit defaults are kept on file for 6 years. As a result, it will likely show up on all relevant credit searches for the duration of that period. Details surrounding the liquidation could, however, show up for longer, potentially meaning that it remains an issue when trying to get credit as a director well into the future.
Can it impact my personal credit score?
While debts owed by the company won’t impact your personal credit score, if you are indebted to the company that then went insolvent, the resultant actions could impact your personal credit score for up to 6 years.
As a result, it’s critical that you take steps to ensure these links don’t exist, particularly if you suspect that your company will imminently become insolvent. It’s always worth getting advice from a specialist; a small investment now can save you significant trouble further down the line.
Conclusion
We hope this has cleared things up a bit around the topic of closing down companies and credit scores. While there can be a negative impact in certain cases, there are also steps you can take to mitigate that impact, especially when it comes to your personal credit score. Taking these steps requires getting professional advice, and taking their words of wisdom seriously.
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