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How to read a credit report on your customers

Want to know how to read a credit report on your customers? You're in the right place.

You might often see us talking about business credit reports here at itsettled - but why are they useful? And more importantly, how do you go about reading one?

What is a business credit report?

First up, let’s get the definition straight. 

A credit report is a document that highlights the financial position of a business. It contains your businesses credit history, and includes;

  • Your businesses background information, including ownership and subsidiaries
  • The businesses financial information
  • Your banking, trade, and collection history
  • Any loans, County Court Judgements, and bankruptcies
  • Risk scores

Business credit reports are available to the general public, unlike personal credit reports. 

How do you access credit reports?

There are five main credit reporting companies in the UK. They each use different scoring systems, but are all considered equal for the most part. 

You can pay for credit reports via these companies, who usually offer subscriptions or packages - these can vary in price depending on what they include. 

Alternatively, all itsettled customers can request credit reports on any business they want for free - this is all part of the itsettled offering. You can request as many reports as you’d like (within reasonable use). 

Why should you read your customer and clients credit reports?

Credit reports are useful for a variety of reasons - you can use them to gain insight on both prospective customers and existing clients. If you’re about to sign a new client or a contract with a new customer, it’s advisable to credit check them first. This way you can alter your contract and change your payment terms accordingly, and will also give you some insight and background information on the business. You might find out things that a business owner wouldn’t necessarily tell you up front. You should also regularly credit check your pre-existing customers. This may turn up explanations for things that have been troubling you, such as late payment. 

How to read a credit report in five easy steps.

1. Check the company info

Firstly, you should check to see if the company information they’ve given you is correct. This involves the name of the business, their registered addresses and owners, and contact details. This might highlight who the key players within the business are. 

2. Check to see if they’re affiliated

Next, look to see if the business is connected to any other businesses. There may be failed businesses connected to the owners, and this information can give you a fuller picture of your customer. 

3. Look at their credit score

Similarly to a personal consumer credit report, all businesses are given a credit score on their credit report. This is often out of 100, and will usually be assigned a colour depending on how positive the score is. 

4. Financial factors?

A credit score on a report will often be backed up by information on the limiting factors that have impacted the businesses credit score. This can include historic financial details such as if the business has had any County Court Judgements taken out against them. These are especially useful, as you can gain a further understanding of your clients credit score, and you can also understand their history with late payment. 

5. What’s the suggested credit limit?

The suggested credit limit is perhaps the most useful piece of information on the credit report. This number is the suggested amount of credit you should give to your customer. It can help you decide how much work you should complete with the customer, and what their payment terms should be. 

Free credit reports from itsettled

All itsettled customers gain access to free credit reports when they sign up to itsettled’s credit management and debt recovery software. Whilst you would usually have to pay for credit reports externally through your chosen credit report provider, we can offer you them for free as an additional perk of using our software. We help you scale and protect your business - find out more about our debt recovery and credit control software here

Sign up for a free seven day trial of itsettled today. 

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