Company Credit Report
Company Credit Report
A company credit report benefits both companies and creditors. For creditors such as banks, a company credit report represents a low-cost and speedy way of accessing the information that they need for taking lending decisions. For corporations, a company credit report represents a tool for obtaining competitive interest rates from banks and attractive terms from suppliers besides reducing insurance premium bills.
Not surprisingly, lenders and companies voluntarily contribute information to credit reference agencies. While lenders provide information on loans, companies volunteer payment information.
Composition of a Company Credit Report
A company credit report comprises background information on a company such as name and address besides credit information such as payment history, financial accounts, bankruptcy filings, court judgements, inquiries, and transactions with the government. The credit reference agencies usually strive for differentiation by including additional company information from a web search and personal interviews.
A company credit report also includes value-added information such as a credit score and additional ratings. A credit score is a numerical score indicating the creditworthiness of a company. A company credit report of Dun & Bradstreet (D&B) contains a host of ratings in addition to a credit score. D&B assigns an overall rating or credit score to companies, which indicates the creditworthiness and the viability of a company. A company credit report of D&B also includes a Paydex score, which indicates the probability of payment in time. Other ratings in a D&B credit report are Credit Limit Recommendation and Financial Stress Score.
A typical company credit report accounts for a large share of the credit report business. The sale of company credit reports, primarily for taking lending decisions, accounted for 51 per cent of D&B's total revenues in 2004. The value-added risk management solutions such as credit scores are growing in popularity however. The value-added risk management solutions accounted for 11 per cent of D&B's total revenues in 2004.
Growing Market for Company Credit Reports
The market for business credit reports is small compared to that of consumer credit reports, but growing fast. The D&B is the market leader in this segment, followed by Experian and other credit reference agencies. The two European information networks BigNet and Eurogate also play an important role in the company credit report market.
Furthermore, the demand for value-added services based on credit information is increasing. The Payment Investigation Service of D&B responds to a corporate need for improving credit score. A better credit score results in attractive credit terms from lenders and suppliers. This service includes a quarterly Payment Analysis Report, which provides insights into the way lenders perceive a company's payment history.
In addition, the rising menace of company identity theft has given rise to a new segment: monitoring services. Studies show that a sudden spike in inquiries usually indicates identity theft. Most credit reference agencies provide monitoring services, which allow companies to track inquiries. Companies House also offers ways of reducing company identity theft.
A company credit report saves lenders the trouble of collecting information on companies from scratch. A company credit report has also improved the quality of lending decisions. If value-added services such as Payment Investigation Service are any indication, then better applications based on credit information could be around the corner.
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