What is a company credit report and what is it used for?

What is a company credit report? 

A company credit report provides financial background information about a company. It covers information such as the company’s ownership, subsidiary companies, financial information, risk scores and any liabilities or bankruptcies. It is also known as a business credit report.

Company credit reports generally provide the following information:

• Business background information to help verify that a company is genuine.
• Company financial information including a business credit score and potential risk factors.
• A summary of banking, trade and collection history.
• A summary of liens, judgements and bankruptcies.
• Uniform commercial code filings.

Unlike a personal credit report, you do not need any permissions or personal details to run a company credit report. Anyone can view or run a credit report as it is public information. 

What is a business credit score?

A business credit score is a score ranging from 0 to 100 that is given to a company based on a set of criteria. The higher the score, the higher a company’s creditworthiness. The business credit score is also called the company credit score.

A variety of different factors determine a credit score for a company. They include business accounts, such as a company’s balance sheet and cash flow, who the director is, how they pay their bills if they have CCJs (County Court Judgements) and much more.

Credit agencies like Creditsafe and Experian start building a business credit record for your company from the moment you start with your business. Each company has their own algorithm for calculations, which is why a score may differ from company to company.

What can I use a company credit report for?

Business credit reports, also called company credit reports, are used to run business checks on potential customers, suppliers and partners. You can use a credit report to: 

• Determine how reliable or how creditworthy a company is.
• Find information on and monitor your competitors.
• As a customer and/or supplier you may use a credit report to check up on a company before they do business with you, and your customers and suppliers may do the same. 
• Used as a health check for your own company- find out how you appear to other organisations by checking your company credit report.
• Company credit reports are also used to assess your company’s credibility for business loans. 
• Insurance firms may also use these reports as part of the risk management process for a business.

Why should I run a business check?

When you run a business check using a company credit report, it helps mitigate the financial risk associated with extending credit. It is a part of financial due diligence before doing business with another company. 

Here are some reasons why you need to run a business check:

Find out what potential customers or suppliers think of your business

Running a company credit check on your own company helps you see what potential customers and suppliers see. This will help when you’re pitching for new business and partnerships.

Keeping track of your company credit score will also help you manage and improve your business credit. This can help you obtain the funding you need to expand your business and maintain creditworthiness. It also helps you monitor your report for potential errors or inaccuracies including fraud.

Avoid working with fraudulent companies

You should always check that a company is legitimate before doing business with them. This does not mean just checking their website and telephone number works. All limited companies should be registered at Companies House and will have a company number. You can view scanned copies of Companies House documents to verify a business and check the directors match up to who you’re dealing with face to face. 

Avoid making bad credit decisions

You should always assess the financial risk of doing business with any company whether you are working with or extending credit to them. Company credit reports can help you do this. You will be able to obtain the financial background information on a business, including a company’s payment behaviour, judgements, liens and bankruptcies. 

If you find that the company in question is a financial risk, you’ll be able to make a smarter decision about the pros and cons of moving forward with a potential partnership.

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