Our company reports provide information on a company’s accounts and financial information, but they also provide an insight into a company’s credit score and suggested credit limit.
Checking a credit score is a great way to find out more about a potential client who you intend to do business with, as you will need to know if they are able to easily repay debt when necessary.
What do the credit scores mean?
The score is a rating out of 100 (with the best rating being 100). A ‘traffic light’ system indicates the level of caution needed – green suggesting a positive credit decision and red to advise attention is needed.
There will also be a statement explaining the creditworthiness, but this may not always be an exact representation. For example, a score of 40 would include a note to say that the company is ‘creditworthy’, but it would be highlighted red, which would show that the score does need improvement.
Generally speaking, credit ratings above 60 are seen as being more reputable, and therefore safer to do business with.
How are the credit scores calculated?
‘Good’ and ‘Bad’ companies (in terms of debts) are statistically analysed over a period of time to identify trends. Similar companies are compared before analysis is completed. Predictive variables are then added into scorecards with statistically proven weighting, and a final score is created (from 0-100).
The scorecards include a number of variables (usually between 15-20) which then has a variety of different criteria, including director history, payment history, financial performance, auditors information, age of company, CCJ information, whether the company is part of a group and the number of group companies that have previously gone bad.
A company’s rating and/or limit could either be suspended or reduced if there are a high number of CCJ’s, accounts were overdue at Companies House or if the company is a foreign company; it is subject to insolvency. Scores are updated daily.
What is the credit limit?
A credit limit accompanies the rating to give you a recommended monthly amount of credit to offer the company.
If the latest credit limit appears dated, this means that the credit limit has not since changed.
We hope this provides valuable insight into credit scores. If you would like further information take a look at our FAQs. Ready to try out a report? Click here.
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