FINANCE AND BUSINESS
All credit to the business
Access to cash can be restricted or carry a burdensome cost if a borrower is seen as risky. Adam Bernstein
discusses how having a whiter than white credit report is going to put a business above its rivals
We’re credit checked and
either approved or rejected
or, depending on the status,
you have it granted but on
Credit checking ties an individual’s
record to publicly available information,
which is shared by financial
organisations with credit reference
agencies. But not everyone appreciates
that the process applies to businesses too;
if firms want the best terms, they need to
maintain a good credit score.
A credit score is a measure of
creditworthiness, which is made up
from a number of different factors
to understand financial position and
level of financial risk. This information
is combined to create a score which
influences whether companies are seen to
be a repayment risk.
Experian, for example, uses a system
that gives a credit score that can range
from 0 to 100, with 0 representing a high
risk and 100 representing a low risk.
Zero, for example, would be applied to a
failed company, 26-50 to an above average
business, while 91-100 is a low risk firm.
Business information is held by a
number of credit reference agencies and
comes from multiple sources, including
creditors, such as banks, credit card
companies and building societies, as
well as publicly available records such as
Companies House or the main Gazettes.
It’s collated with data on payment
performance, County Court Judgments
(CCJs) and bankruptcies.
Credit reference agencies will look
at this data in a number of ways, using
aggregated data sources and applying
analytical methodologies to build the
score. Agencies also use databases
that have been built up over time to
understand how businesses that were
created historically have performed
through an extended period.
Because of these processes, businesses
should try to maintain a good report,
as it influences their ability to make
purchases. But while business credit
ratings are not as ubiquitous as personal
credit ratings, they are more prevalent
when dealing with larger purchases or
The problem for businesses with little
to no financial or credit history – known
as ‘thin file’ businesses – is that they may
struggle to be accepted or get the best
rates. In these circumstances, a business
owner’s or director’s personal credit
scores can be considered to help with
Where information held is inaccurate
or plainly wrong, steps should be taken
to correct it. The only option is to dispute
the business credit report by contacting
the relevant credit reference agencies.
Not only can they correct data that can
be shown to be inaccurate, but they also
have services to review company reports.
More than one use
The wonder of information is that it
invariably has more than one purpose.
Just as a credit report allows a lender a
window into the world of a (potential)
borrower, so the process can be reversed
by a business looking to check on its
suppliers and its (corporate) clients to
ensure they can pay for their services.
It’ll also help set credit terms granted to
But checking potential clients for their
ability to pay isn’t the only advantage of
credit checking. Credit information helps
fight fraud in that a business can confirm
contacts and clients are who they say
they are – and that their business is
performing the way they say it is.
Cost of service
Credit reference agencies offer a variety
of services to support businesses such as
ad-hoc credit reports or data for account
opening and account management. Each
agency has its own variants – Equifax,
for example, offers products to age verify,
bank account verify, document verify,
The costs associated with credit
information aren’t as horrific as might
be expected. For example, Experian’s
Business Express allows the checking
of clients and costs from £25 per month.
Alternatively, to check a business’s own
credit score, Experian offers My Business
Profile at a cost of £24.99 per month.
Like it or not, credit information
exists and is here to stay. Whether it’s to
borrow or to seek terms with a supplier,
having a whiter than white report
is going to put a business head and
shoulders above its rivals.
fraud in that
clients are who
they say they
are - and that
the way they
say it is”
24 www.rcimag.co.uk August 2020