The Top Credit Checking Myths.
Credit checking is now a fundamental process for most companies, but every now and again we still come across business owners, credit controllers and business development specialists who aren’t running checks. Not only are they not checking current or prospective customers, but they’re also not aware of their own company score.
It seems there’s a heap of reasons why these companies aren’t credit checking, but very few of them are valid. In fact most of them are myths. Luckily we’ve helped straighten out these misconceptions and now we want to do the same for you…
Read our top 10 credit myths below and see if any of them have been holding you back.
1. A poor payment review or CCJ will be wiped from your report once it is settled.
Knowing if a company has had CCJs filed against them is essential in protecting your business from risk, this is why we believe it is vital to share this information on our credit reports. If a company acts fast and settles a CCJ against them within a month, then we will wipe it from their credit report. After this, whether the CCJ is settled or ongoing it will stay on the report for 6 years.
2. Monitoring your business’ own score will damage your own rating.
This myth is more the case for consumer reports, so don’t worry; your commercial report is much less sensitive to monitoring. You can check in and review your own report regularly without running the risk of running your score into the ground. If fact, this is something we would definitely recommend.
3. A credit score is based on accounts filed just once a year
We use much more than just the financial accounts to generate our credit scores. After all, non-limited companies such as sole traders aren’t required to share their account and smaller limited companies only reveal a snippet of them. We analyse a variety of information from live data sources such as trade payment data and the Gazette, meaning the algorithm our credit scores are built on are fed new information over a million times per day.
4. Credit blacklists exist.
There is no such thing as a credit black list. You and other businesses are free to offer another business credit as you wish, we simply offer insight and recommendations so that you can make an informed decision. Based on a score of 0 – 100 in the UK, we deem any business over 30 as creditworthy and any over 51 as low risk. Get a free credit report to see the credit score and recommended credit limit for any UK business.
5. Credit checking is expensive and time consuming.
Having access to reports on all UK businesses is not free, but it’s definitely cheaper than the potential bad debt you are putting yourself at risk to without them. With Creditsafe’s Risk Tracker you can set up automated email alerts on all of your customers, so you can stay in the know of any changes to their report without the need to login and check yourself.
6. Being turned down for credit will negatively affect your score.
In truth, only you and the company you’ve applied for credit from will know this. They don’t submit the information to anyone else, so you need not apply in fear. Companies will check out your report when making the decision as to whether to work with you or not, so make sure you know where you stand by viewing your own report.
7. A credit report only gives you a credit score.
Creditsafe’s credit reports are one of the most comprehensive on the market. Filled with a plethora of information about the company in question, you can view everything from its financials and payment data where available, to director information and media coverage. All of this information we then use to generate our scores and credit recommendations. Want to learn more about what is included in our reports? Sign up for a free demo here.
8. Credit reports only offer a snapshot in time.
This couldn’t be further from the truth, our credit reports are updated over one million times per day and store historical data from the past five years, giving you a sizable timeline of information so that you can see the direction a company is heading in.
9. Only companies with a negative balance sheet fail.
This isn’t the case, but is sadly a common misconception. Company financials are reflecting on historic events so they aren’t always the best indicator of a company going down. A company can change significantly in a small amount of time, e.g. since they last filed their financials. So instead, we utilise a range of information including trade payment data, director changes and media coverage to give us an understanding of a company’s health and stability.
10. If my credit score isn’t near 100, I’m not doing well.
Everyone wants to be top of the scoreboard, only 12% of companies in the UK have a score over 90; they are the exception, not the rule. Always aim for the sky, but as long as you’re above 30 you are deemed creditworthy.