A credit score is assigned to a company as a measurement of the creditworthiness of a company. Calculated from available financial data and credit history of the company, it is an accurate measure of the financial position of a company. The credit score also allows you to judge whether a company would make a good client or a trustworthy supplier.
The Importance of a Credit Score
As the credit score is calculated from a company's financial data, it gives a more accurate measure of the credit worthiness of a company as compared to subjective methods.
It is advisable for a company to know their own credit score as it will allow them to be realistic as to what their company can work towards. It will also point out the areas where readjustments and improvements can be made and therefore many businesses rely on this knowledge to make numerous decisions.
Before making a decision to extend credit to customers, it is advisable to obtain a credit score for them first. This will give you an indicator of how the client is like at repaying past debts. Knowing your potential clients' credit score will help your company to make the appropriate decisions.
When deciding to switch or use new suppliers, it is also a good idea to know their credit score. This will help you to steer away from bogus suppliers who do not deliver goods after payment.
- You should obtain a credit score on your own company so that you are able to see the areas where improvements and readjustments can be made.
- Always check out the credit score of a company that you are thinking of doing business with - especially before extending credit.
- Look up new and potential suppliers' credit score before trading with them.
Absence of a Credit Score
Sometimes a company may not have a credit score, this does not mean that a company is not trustworthy. The absence of a credit score is due to an absence of financial data.
All limited companies within the UK file away documents at Companies House, amongst these documents are annual accounts, returns and shareholder information. It is this financial data that is used to calculate the credit score. If this information is not readily available, credit companies cannot assign a score.
The following lists the reasons why a company is not given a credit score:
- The company is newly incorporated and have yet to file their first annual accounts
- The company is an unincorporated sole trader or partnership who are not required to file accounts with Companies House
- The company is classified as Dormant or Non-Trading. These companies file dormant accounts with Companies House which show only assets and shares. This means that a credit score cannot be calculated as the company is not trading.
- The company has gone into liquidation or ceased trading
Company Credit Score with checkSURE
You can now obtain a company's credit score through checkSURE Ltd. checkSURE's database covers 1.7 million limited companies within the UK and also sole traders and unincorporated partnerships. The checkSURE service is provided online and credit reports are delivered instantly via email and placed within your personal portfolio on payment. You will also receive free email updates whenever there is a change affecting the company's credit score.
Register free online now by clicking here and receive your company credit score.
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