A business credit report, also known as a company credit report is a comprehensive document detailing the financial records of an organization using the information supplied by different creditors and lenders. In return, this report is referred by other lenders to analyze the subject’s creditworthiness before lending them a credit. Besides lending purposes, many companies may look up a business credit report as a part of their due diligence process before entering into a deal, merging, acquiring, or onboarding new suppliers. A credit report is compiled by a commercial credit bureau such as CRIF who also provide credit score for companies. Let us look at what a typical business credit report looks includes.
What’s in my business credit report?
A credit bureau report is usually divided into sections such as personal information, lines of credit, public records, and hard inquiries. The report starts with personal identifying details such as the name of the company, date of establishment, etc. It also includes background information such as its parent and subsidiary companies, ownership, years of operation, etc. Then it includes financial history such as repayments, collections, revenue generation, bankruptcies, and more. The final section of the report lists all of the entities that have recently asked to see the individual’s credit report in response to their applying for a loan.
Factors that influence your credit report
Much like your personal credit report, your company credit report is also affected by around the same factors except, in this case, they are in terms of a business account. Let us look at 3 such important factors which affect your credit report
- Credit History & Outstanding Debts: Credit history is the essence of a credit report and naturally has the most hand in your credit health. Credit history includes credit length – the longer the better; repayment history – the consistency and regularity in which your company has been paying off its dues. Current and past loans – also the number of credits you are simultaneously using and your outstanding debts.
- Credit Utilization Ratio: The credit ratio is the amount of revolving credit you’re currently using divided by the total amount of revolving credit you have available. In other words, it’s how much you currently owe divided by your credit limit. It is generally expressed in percentage. Now, in order to have a good ratio, your credit spend should ideally be under 30 to 35% of your credit limit. A higher spend ratio indicates that you are relying extensively on your credit card and hurts your credit score.
- The characteristics of the company: A company characteristics also play an important role in your business credit report. For instance, older companies have better credit scores as compared to startups. The logic is that the company has sustained itself long enough and has built an adequate financial history. Another trait could be the type of industry the company belongs to such as real estate, pharmacy, insurance, retail, manufacturing, food & drugs, etc. Some industries are considered high risk while others are deemed safer because of the nature of business and the market trends during the time.
The above 3 factors form the gist of the business credit report and are required to be mindful of by all businesses. If you are looking to enter a deal, onboard a new client, conduct a supplier risk assessment, or simply want to check your own business creditworthiness – download a credit report from CRIF – the leading consumer credit bureau in India.
