Everything You Need to Know About Commercial Credit Reports

  • Whether you are planning on applying for a business loan, going into business with another firm, or simply want to manage your business finances better by viewing all your current debt, you will need to apply for a commercial credit report. This works the other way around too. If you are taking on new clients, partners, or suppliers, it is recommended that you obtain in-depth information from the respective credit bureaus in South Africa about the business and their principals in order to reduce the risk associated with non-payment.

    While you may already be familiar with the basics of consumer credit scoring, it is of utmost importance that, as a business owner, you familiarise yourself with the other type of score that could have a large impact on your business, whether directly or indirectly, – the commercial credit score – which is obtained from the commercial credit report.

    Whether you have applied for the commercial credit report for your own company to better manage your finances, or for a potential client’s company to mitigate any risks, you need to ensure you pay close attention to the following points revolving around business credit scoring.

    • A commercial credit report can predict the likelihood of late payments

    Similar to that of a consumer credit report or score, commercial credit reports will calculate a number that indicates the risk associated to a company. Most finance experts have stated that the commercial credit report will ultimately determine whether the company in question will be likely to make late payments.

     

    • The commercial score can affect business relationships

    As mentioned previously, if you are considering going into business with a client, firm, or supplier, you will look at the company in question’s commercial credit report. As such, the commercial score the company receives will affect whether the partnership is a success or not. While banks are the primary users of such reports, they are also used by lenders, credit providers, leasing companies, and insurance firms, to name a few.

     

    • Scoring methods vary depending on the company and industry

    When it comes to commercial credit reports, credit scoring companies look to various types of data. There is no one single score that is entirely dominant in business credit scoring. The five categories of data that will be considered are the company’s current payment status, the amount of credit currently being used, derogatory items, historic payments behaviour, and the company’s demographic information.

     

    • Good habits often lead to improved scores

    If you are unsatisfied with the company in question’s commercial credit report, as they have a negative credit score, look at the company’s habits. Good habits, such as prompt payments, managing utilisation, and avoiding legal trouble, often lead to improved commercial scores. After some time, request another commercial credit report, as their score may have improved.

     

    • A consumer score can impact the business score

    When looking at the company’s commercial credit report, keep in mind that the owner’s consumer score may have been used in the calculation of the businesses credit score. This further highlights the importance of managing both your consumer and business credit scores.