Certain TV channels, the ones further down the EPG, are full of adverts for free credit referencing. ‘Find out your credit score for free! Check your credit score before you apply for a credit card! No fuss, no hassle credit checks!’ they yelp, usually accompanied by a man looking quizzically at an i-Pad.
Knowing your own credit score as a consumer might be useful if you are contemplating a loan but, if you’re a business, knowing other people’s scores is even more important.
We use Nottingham-based Experian to verify the credit status or worthiness of businesses who our clients are working with. There are others such as Equifax and Credit Faith.
We pay a monthly fee, as most businesses do, and it gives access to a range of information. We use it to give a guide to the stability of or any changes to the company that a client is planning to deal with or is dealing with.
The information includes:
Credit score – usually out of a hundred, indicates credit worthiness.
Credit rating – a guide to the amount of credit that the business would be able to repay at a given time. So if I’m dealing with Acme Motors and the credit score is 98 out of a 100 and it has a rating of £450,000, it should be a solid bet.
Looking further, it will also tell you:
When the company’s next accounts are due
Any negative information such as if the firm has any County Court Judgments (CCJs) against it.
If the payment history has changed – are they paying their bills sooner or later than previously? This will also influence their credit score.
Any charges or debentures to the bank or to factoring companies (invoice discounting companies).
Further on, you can usually see the last three years’ published accounts, although bear in mind that when they are published they are already about 18 months old.
In terms of who’s in charge, it will tell you who the directors are and if any have recently been added or resigned. By clicking on a name, you can also see whether that director has other directorships, resigned a directorship or been a director of a dissolved company. So it gives you quite a track record of the directors and what else they are involved in or have been involved in in the past.
We consult Experian as a matter of course on every case, looking at the information on both the client approaching us and on their debtors.
We are dealing with a large number of companies at any one time so, to help keep track, we Experian’s monitoring function which alerts us to a change in payment timings, new or resigning directors or any of the changes listed above.
This is very useful as, when a company runs into trouble, the news may not become public for some time.
This is why monitoring is important: it will flag up any changes quite quickly, meaning you know in advance that a company may be heading for difficulty so you can put a brake on any plans to do business with them.