Credit Scoring – both an art and a science!
Credit scoring lies at the heart of the checkSURE system Full Company Reports are available on millions of UK Limited companies online, 24 hours a day at only £9.95 plus VAT. The reports are supplemented by one of the most comprehensive Company Reports Help facilities on the Web.
checkSURE Full Company Reports will include the following:
|Company Name and Number
Registered Office Address
The checkSCORE - Credit Score
Official Company Information
Profit and Loss
Key Credit Ratios
Key Industry Sector Trends
County Court Judgments (CCJs)
Mortgages and Charges
Credit scoring is an information gathering process which results in a mathematical representation of the information held within a credit file. As such, it is one tool to be used by a credit grantor in making a decision on whether credit should be granted. This information is provided in conjunction with a credit report in order to help creditors to make decisions.
These credit check reports are include a a flexible number or alphabetic grade which has been derived as a result of the credit scoring process. This score changes constantly because of continuous changes in a company’s credit file as new information updates are reported and processed by the credit scoring algorithm. It is also important to understand that what is an acceptable level of risk for one businesses in granting credit to a supplier for example, may not be acceptable to another. Usually this has little to do with credit scoring but rather human judgement as to what a failure to pay will have on a creditor’s business. Overall though, a good credit company report will usually mean a good credit score or in checkSURE’s case, checkSCORE. Consequently it is a good idea to review your company’s credit report regularly and make appropriate changes if needed to ensure the best score possible. Usually the higher the score your company has, the less difficulty you will have in obtaining credit. With a high score, your business has a good chance of getting the credit and loan(s) you want. Bear in mind that when lenders consider a loan or credit application, they generally ask for more information because credit scores are not the only factor they use in making decisions.
Both negative and positive factors influence your own company’s score. Remember that your overall company profile will determine how strongly any individual factors will impact your score. For example, if your business has a generally very high score, the odd negative factor in your analysis is likely to have a small impact. The same is true for positive factors if you have a very low score. Having a large amount of credit, so long as it appears to be well managed, is likely to reflect positively on your businesses because it indicates to lenders that other lenders have trusted you by lending you money in the past.
So, if your businesses have never missed a business loan payment, and has no negative public records listed on your credit report this will help your score. Missing a single payment is not as harmful to you as missing several consecutive payments because credit scoring systems normally consider missing 3 or more consecutive payments as an indication that your business may never repay them. It is worth bearing in mind that whenever you apply for credit and the lender applies to see your credit file, this will be logged on your record as an 'inquiry'.
Too many credit applications within a short period of time will undoubtedly have a negative effect on your company’s score. Credit scoring for legal trading entities is a nascent science, particularly if they are unincorporated. Nonetheless, no company should be remiss in keeping track of its credit score.