What is a Company Credit report?

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A Credit report encompasses all the information regarding a firm’s credit loan and overall accounts in line with what is reported by other organizations you have done business with or currently in business with. Those reports will report all transactions except the history of outward payments, to whichever credit reporting organization is recognized in the country.

Making constant checks on credit report and score should be top priority for a firm’s finances to ensure they are staying above. The report helps to illuminate the firm’s financial position, and even help the company identify theft and fraudulent activities.

Why you need to check credit report

About 30% of people worldwide have never gotten and or checked their credit report, which is why many startup businesses fail. They are usually so engaged in trying to implement business ideas and strategies that the long-term financial implication does not occur to the founder, jeopardizing the firm’s financial health state. Forgetting to constantly review credit score will lead to incurring additional payments, lead to rejection of loan proposals from banks, private lending institutions, and potential investors.

Aside from the aforementioned, a business with good credit score will receive lower interest rates on loans from banks as opposed to establishments with lower scores. This in turn helps businesses save a lot of money, especially if the amount being borrowed is large, and over a longer period of time. They also enjoy the added benefits of receiving higher loans than the value of the collateral involved given the fact that they can be considered to be financially responsible enough to pay back the loan.

Loan interests – For an establishment, the quickest and easiest way to raise funds for business activities is through loans from financial institutions. However, if the firm is not up to date on its financial health status which can only be provided through credit reports, the loan request will be denied if the overall credit score is not high.

Expansion – Expansion is key to the development of any establishment, however, without a recent report of its credit, it may be virtually impossible. Aside from the fact that the overall long-term effect of the immediate expansion may not be favorable to the business, most building owners require comprehensive credit reports from the company looking to rent their business. If the credit score ends up being unfavorable, the expansion may not happen.

Investors – Another great source of income for developing establishments are investors. While most are looking to promote an already made business venture, there are several who look to buy into upcoming and promising business prospects. With a low or average credit score, the firm can forget investments because no investor is looking to incur losses on money.

Suppliers – aside from maintaining good relationship with financial institutions providing loans, and investors, suppliers who deliver in bulk majority of the materials you use in running business are more inclined to keep business going with your firm if the credit score is on the high side.

While they most times go together, credit reports and credit scores do not essentially mean the same thing. A credit report is the list of old and present credit activities and how it affects the business’ eligibility to get credit and the terms of said credit while the score is a mathematical formula which converts the information on the report into figures.

What does a credit Report Contain?

For an individual, it contains basic personal information, credit card information, financial information comprising of loans taken, debts incurred, and how long it takes to offset the debts.

For a company, it is quite similar, with the difference being firm name, registration number, transaction details. However, not all transactions are contained in the report, with promptly paid utility bills, cash transaction, and checks not included in the report. Those only seldom add to the overall score given.

How to Increase Credit Score

To ensure that financial stability is one less thing to worry about while trying to run and maintain a business venture, here are a few ways to better credit history:

  • Request and review credit reports often, be it quarterly, semi-annually, or annually
  • Avoid applying for credit except for when it is absolutely necessary – if the amount required is not so high, it is advisable to seek financial assistance from friends and families, incurring debts that will not occur on the firm’s financial record.
  • Pay all bills on or before the due date – if there are several bills to be paid, it is advisable to leave standing orders with the bank to pay those fees off monthly or weekly, depending on how often they occur; this shows financial responsibility
  • If the credit amount is over the amount you actually require, begin to pay back in installments rather than waiting for the money to be complete. By paying in installments, you reduce the amount gained in interest rates; this will further encourage the financial institution to lend the business in a future date.
  • Most importantly, if you have racked up several debts from various places, and your firm gets issued tax lien – a standing order which informs you that a certain debt to the government takes precedence and must be offset immediately, it is imperative that you focus on it and pay it off immediately, and apply for withdrawal so that the action is cleared from the financial record so that it does not affect your reputation, and more importantly, discourage potential future investors.

Conclusion

The good news is, credit reports are easily accessible these days, especially with the fact that everyone is eligible to receive a free report annually, whether online or in person through the recognized credit institutions, with each one using their specified grading system.

A good credit score qualifies a firm for several benefits as listed above, and regularly getting reports can help determine financial status, how to escape and improve a low credit score, and how to retain an already high credit score.

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