As more and more businesses offer a credit facility to their clients it is important that they are aware of exactly to whom they are offering that credit and the credit history of that person or business. With the advent of the internet it has become much easier to check the credit rating of an individual or company, as there are many sites that offer a search service. The benefits of having this type of information are numerous. By using credit reference agencies a business is able to minimise the possibility of invoices not being paid and will enable better business decisions to be made. Costs vary depending upon the type of search that is being carried out but this is a small expenditure that can pay dividends in the long term.
How does a credit search work?
As the information is available at the touch of a button and agencies update regularly, most business credit reports will be no more than 24-hours old. Searches can be carried out on the names of individuals or businesses. Different sites will expect different identifying information to be inputted before a search can be carried out properly. Some sites will offer a variety of tools that help users to get used to using the technology before carrying out real searches.
A credit search simply looks at the credit history of a person or business. It will show all the important factors, such as payment histories to other credit facilities such as loans or credit cards. A person who has missed payments or been consistently late with them will have a reduced credit rating. A credit search will also show if there are any CCJs (county court judgements) or bankruptcies on the file. The rating that appears on a credit search will also be affected if the subject already has a great deal of debt. Applicants who regularly apply for credit may find that this also reduces their overall credit score.
Business requirements for obtaining credit
A business that is applying to another business for credit should be set up properly in order to develop its own credit profile. It should have a bank account that is separate to that of the individual(s) running the company and have all the necessary registration paperwork in place, such as a company number. The business address on all documentation should match and be correct. When business credit reports are produced this will help to determine if credit should be given.
Building a credit profile can be easier than first thought for new businesses. There are many companies that are welcoming to new businesses and will offer small amounts of credit. By paying monies on time this will help to build a profile with the credit reference agencies.
As information can be assessed over a number of years, a company with a credit history of several years and with a good payment record will have a better rating. However, if a company has a CCJ on its credit file then some agencies will be able to determine the level of risk involved and rate the company accordingly, so not all companies that have these black marks will be considered to be high risk.