The importance of knowing details about your credit information cannot be overemphasized, as it becomes a very key factor when it comes to loan applications. Banks and every other financial institution place a great deal on the credit information or report of anyone who comes to them for business. Hence, as a business owner, it is very important that you keep a clean and good credit report. As an individual also, your personal finance credit score measures your creditworthiness, it also determines your ability to qualify to purchase a home or car. This begs the question; how do you know whether your credit report is good when you do not see it?
To some persons, you only get to see your credit report only when you're a member of a financial institution. This is not true, as anyone can see their credit report whenever they chose to see it. Well in this article, we shall be revealing several ways through which you can check your business and financial score online.
WHAT IS A CREDIT SCORE?
A credit score refers to a value gotten from an individual or a business credit usage and history. It is a three-digit number that measures the possibility of your repaying back a debt. This credit information provides lenders with an insight into the risk they are taking in providing a loan to a business or an individual. A good credit score clearly indicates your level of responsibility in loan repayments. A low credit score indicates that you have outstanding debts and this automatically disqualifies you from entering into further debts. Conversely, a high credit score is a clear indication of your ability and responsibility in showing commitment to your debts. It also shows you that your debts are paid before due dates. The ideal credit score should fall in the range of 697 to 850.
WHAT IS A CREDIT REPORT?
A credit report is synonymous with a report card, in the sense that it contains a detailed breakdown of an individual's or a business's credit history. It gives a clear picture of how individual or business finances are managed. This information is arranged into a credit report by the credit bureau of a country. They collect financial information about individuals and businesses and systematically put these together in a credit report. The credit information in the credit report is used by lenders to determine the creditworthiness of individuals and businesses that are applying for loans.
HOW TO DO A CREDIT CHECK IN MALAYSIA ONLINE ?
The factors that determine the credit score of a business are very similar to those for a personal credit score. However, their range are different, individual credit score ranges from 350 to 850 while business credit bureaus uses a different scale.
IMPLICATION OF SCORE
Lenders see you as very favorable to give loan to. Your score indicates that you are consistently responsible for managing your borrowings. This makes you a strong candidate for loans with the lowest interest rates.
Scores within this range qualifies you as a top customer. You are considered as being financially responsible for managing money and credit. You pay most of your loans on time.
With this score, you are placed above average and commercially plausible. You will be offered competitive interest rates for new loans, but not rates better than those for the top two categories. This score will hardly qualify you for certain types of loans.
You are less viable and below average for new loans. Your credit history has some bumps, but are not major defaults. You may still have extended credits by lenders, but not at competitive rates.
With this score range, your credit history is damaged due to several loans default from several lenders for different loans. This kind of bad score may lead to insolvency. It is very unlikely that you receive new loans.
With this kind of score, your chances of receiving a loan is almost zero.
Your chances of getting a loan is zero.
Now that you know what the number on your business credit score means, and have seen the importance of maintaining a high credit score, here are 5 different tools/ways you can check your business credit score for free.
Creditscan Malaysia is poised at finding potential hidden risks in the business environment, whether it is internal or external factors. They solve some of the most complicated business challenges by bringing to light new ideas.
Creditscan serve as an unlimited commercial intelligent solution portal. It is developed by Dun & Bradstreet Malaysia, where the main purpose is simply to facilitate their clients with what they need to form an intelligent decision when managing business associated risks.
NAV offers its service to both consumers and business owners to monitor their credit score. With NAV, you do not need any credit card to sign up, and it offers you with a summary of your business credit report from Dun & Bradstreet and Experian. This is great because you get these two different scores in just one place.
If after seeing the summary of your credit score, you decide that you need to see the full credit report, you will be required to pay for NAV services. Having access to your credit scores is an excellent way to start monitoring your business credit. With NAV, you can set goals to improve your business credit score and they offer error disputing.
Credit signal is a credit information reporting service offered by Dun & Bradstreet. It offers an easy system to monitor your business credit. After you sign up on creditsignal.com, you have the leverage of monitoring any changes on your score and viewing when someone has requested for your score through the online dashboard, mobile app, or email alerts.
With credit signal, you get to receive tons of educational resources ranging from receiving advice on how to improve your score looking at your credit history, or even providing you with information about your industry in regards to credit.
Although these features are free, you will however be required to pay if you need a detailed credit reporting. The paid subscription will allow you to view your actual score, your rating, and anyone who viewed your credit information.
Scorely.com provides free credit report demo, and then offers an optional paid service for credit monitoring and full detailed reporting. Unlike the other credit information reporting tools for business score and finance score online, scorely is considered to be a business credit reporting bureau, and one that is known for its transparency. It provides comprehensive credit reports by accumulating data.
For businesses where the owner is not familiar at all with credit reporting, scorely gives an easy-to-read display of data and reporting. They also provide you with realistic tips that can help you to improve on your business credit and take control of your business' future.
This is another credit monitoring service. With creditsafe.com, you can opt-in for a paid subscription, but you can as well get started with a free business credit report.
Creditsafe.com offers many credit monitoring tools such as financial data, payment trends, risk rating, days beyond terms, and many more. They offer three packages depending on your business needs: standard, plus, and premium. And after getting your free credit score report, a consultant from creditsafe.com will provide you with quotes based on your business' needs.
WHAT TO DO WHEN YOU ARE DENIED OF A LOAN
In some specific cases where you have applied for a small business loan, and your loan request gets denied, there is a silver good news for you. You can request for a free business credit report after you have been turned away.
Once your loan has been turned down, the credit bureau contacted by the lender to get insight into your business credit score will send you a mail letter. With this letter, you can receive a copy of your business credit report from the credit bureau if you send back the letter with 90 days of receipt. When returning the letter, you should attach a written request to access your free report.
Your credit score will be sent to you for free upon request, but it will not contain all the available information. The only information that will be contained in the report sent to you will be the one used by your lender, so you will see only one score. However, for sake of curiosity as to where your business stands and your business' payment history and the reasons why the loan didn't come through.
HOW CREDIT REPORTING AGENCIES CHECK YOUR CREDIT HISTORY
Credit history is a documentation of your credit accounts and other relevant details contained; the details comprises the type of account, credit limit or amount of loan, minimum payments made, current balance, account status, recent payments and your part in the account, for instance, if you were a joint borrower. Credit reporting agencies also access your credit history to determine your eligibility status for a credit card or loan; default in payment for a few times can be pardoned, however, a trail of debts would inhibit your chances of getting your application approved.
Credit reporting agencies (CRAs), otherwise called credit bureaus represent companies who maintain your credit report; the credit report is a document that contains your credit history and the relevant data. As much as the credit history informs CRAs on your eligibility status when applying for a loan or credit card, it is however, not the sole dictator as to your getting the approval, it simply serves a pointer for these CRAs to see your abilities to repay loans and keep up with payment plan.
In checking your credit history, three major companies who have been licensed under the Credit Reporting Agencies Act 2010 and fully registered under the Registrar Office of Credit Reporting Agencies may be consulted. These companies give distinct credit reports; the companies and the reports they issue are:
- Credit Bureau by Bank Negara Malaysia - it controls the CCRIS (Central Credit Reference Information System)
- CTOS Data System - it manages the MYCTOS score report
- RAMCI, RAM Credit Information - it gives out the RAMCI Personal Credit Report
Here are the details of each of these reports
This is issued by the Bank Negara, Malaysia, and the report shows your outstanding loans as well as applications for loan or credit card during the last one year. It also includes any pending utility bills and insurance premium, as well as the banking records you have. These data are put together by a system of financial institutions in Malaysia. Other contents of this report are: summons, unpaid credits, credit facilities that are closely being supervised by financial institutions, loan applications in the past year, whether approved or pending and importantly your financial status (whether or not you are bankrupt). The CCRIS, aside all your financial challenges also display your positive credit information to the court; it showcases your credit approvals and the history of your timely credit repayment. This report is issued at zero cost.
This differs majorly from the CCRIS such that it gets it information from public sources and not financial institutions. The public sources are: The National Registration Department, the Malaysia Insolvency department, CCM (Companies Commission Malaysia) and any public documents or legal proceedings publication you may have appeared in.
The report contains bankruptcy information, legal notifications and details of your business, such as your role in it. Should you have any legal action taken against you in the time past, it would also be included in the CTOS report; most of these pieces of information are public knowledge, hence they are therefore recorded in the report dated to as far back as possible. The MyCTOS has a special score report which is computed based on the CTOS scoring system; this system also has a CTOS secureID subscription which alerts you of any changes that may have been made on your credit facilities. The striking feature of the CTOS report, aside it containing legal holdings dated far back, is that you also get the CCRIS report when you apply for the MyCTOS score report. The MyCTOS basic report is free, the MyCTOS score report cost RM25 while it costs RM99 for CTOS SecureID annually.
RAMCI personal credit report
This report package has various packages with various contents you can choose from such as: the PCRB (Personal Credit Report Basic) and the PCRP (Personal Credit Record Plus). Both these report packages contain RAMCI credit information and data from ANGKASA salary deduction system (SPGA). The contents of the AMCI credit information are gotten from public sources and business partners, while those in the SPGA is available only for public servants.
The RAMCI has a unique credit system of their own called the i-Score system; it is a 3-digit scoring system that predicts your ability to repay your loans as scheduled. A high score is a reflection of high repayment tendencies and hence boost your chances of getting loans from banks and financial agencies. The score rating is made available for PCRP and My Credit Watch reports from RAMCI; the PCRP contains your banking credit data at the top of the i-Score report, legal or bankruptcy status and credit records from non- banking industries.
JagaMyID is a reinforced identity protection plan that gives you notification of your daily credit profile and all forms of fraudulent credit activities e.g. a loan or credit card application in your name. Information on individuals or organizations who have made enquiries on your profile and credit history are also contained in this report platform. The PCRB costs RM10.60, while the PCRP is RM15.90; an annual subscription of RM53 per year is charged for jagaMyID.
All of these reports have distinct contents and it is therefore advisable to have at least two, for you to easily spot errors and fix them, making your credit history impeccable.
WHY DOES YOUR BUSINESS CREDIT SCORE MATTER ?
Before we delve into details of how a business credit score works and how it is calculated, let us consider the reasons why a business credit score is necessary. For small businesses that are in the startup stage, they may not recognize the necessity of business credit score, and its importance.
Well, for business owners, small or big, a business credit score is very important. In fact, it is the same way your personal credit score is important to your personal finances, so also your business credit score is key to your business finances, and it ultimately plays vital roles in growth and success of your business operations.
That being said, what is business credit? Business credit is the qualifying factor of a business for financing. A business credit score is not just necessary but also extremely important. It becomes a deciding factor when it comes to your ability to secure a lease, insurance policy, supply or financing. This is because it is a measure of your business's trustworthiness with business finances. So, it is seen that a good credit score is one major factor that will help you get approved for financing as well as offer protection to your personal credit.
The better your business credit score, the more financial option you will find available to you. To illustrate, if a business credit score is high, it indicates that your business payment history is good and is credit worthy, business lenders will feel more comfortable and relaxed in approving small business loans or other financing to the business. Also, lenders will offer the most desirable products and rates to you only if your score is high. Your score ultimately shows to lenders your ability and capacity to payback whatever you borrow.
Additionally, aside securing financing, a strong business credit score can help you get favorable payment terms from any of your business suppliers; this is because it shows you reliably pay your bills, hence, you might also be able to convince your suppliers to offer more comfortable terms.
All of this being said, even if you're not looking for business financing now, you may be in the future, and therefore, you will want to build up your business credit score from the start of your business's history. Although it is possible to secure a loan or other credit product without a business credit score, or with poor credit, it's much more difficult and limits your options significantly.
HOW TO BUILD YOUR BUSINESS CREDIT
Having seen why you should build your business credit, knowing how to go about becomes the next step. Here are a few ways you could build your business credit
- The first step is to put your business on the map, make your business known. Do the necessary legal documentation for your business, it shows credibility; have an account with the name of the business and carry out business transactions using the business name.
- After establishing your business, it is expedient to have and keep a good relationship with your suppliers and vendors; this gives you a good track record with them and also helps you establish good business credit history
- Having a unique means of identification for your business is very vital; get a federal tax identification number or an employer identification number. These numbers help you change your business to a corporation and is also useful in getting a business account or securing contracts.
- Paying on or before the scheduled time is the first rule for any form of credit, as this shows reliability and effectiveness. Late payments have a negative effect on your business profile
- A credit card with a creditor that shows CRAs your credits processing is a way to build your business credit card. It is however advised not to use up all of your credit
- Getting your business incorporated separates your business, personal credit and assets. This prevents your assets form being touched should you get sued
- Separating personal expenses from your business is important in building your business credit; ensure all cash taken from your business is used for running the business to ensure accountability and avoid excessive personal debt
- Keeping an eye on your credit is necessary; closely observe your credit reports to avoid errors and keep your business credit card perfect
FACTORS THAT IMPACT YOUR BUSINESS CREDIT SCORE
Despite inconsistency between the various business credit reporting agencies, you can generally expect that regardless of the agency involved, your business credit score will be impacted, at least to some extent, by certain factors, here are a few:
- Time in Business
A new business is bound to have a low business credit score as credit may not be available; however, after at least two years of consistent and effective operations, creditors and financial institutions will be willing to give out business loans.
- Payment History
Consistency, they say is the key to growth. Paying your bills on time, every time, is the most important factor that will impact your business credit score. A single late payment may impede your future access to capital. It is therefore necessary to set up a system to maintain payments from the beginning of your business life.
- Credit Mix
Building your credit could involve getting a business credit card, taking out loans, or establishing trade lines. Potential creditors or lenders will be interested in how well you can effectively manage your finances when you borrow funds. Your credit mix, therefore will have great impact on your business credit score; this is because your credit mix shows how you take out multiple forms of credit and utilize them suitably. This will have a positive impact on your business credit score.
- Credit Utilization Ratio
CRAs are interested in how you spend your business credit; they want to know what the credit is being used for. Therefore, consistent and regular payment as well as a limited reliance of your business on the credits is looked out for. Your credit utilization ratio is calculated by credit bureau to determine your business credit score. A total of at least 1/4 the amount of credit your business has is a good indication; anything less than that does not speak well of the business credit utilization.
- Mistakes on Your Business Credit Report
Errors are inevitable, they can however, be minimized. CRAs may incur errors when documenting your credit reports; there could be default in computing debt and credit in your report which may drastically reduce your business credit score. It is therefore important for you to monitor your credit reports regularly to avoid these errors; should errors be detected, requesting corrections on time should be the next line of action. You could also go as far as putting in writing any mistakes you might find.
Additional factors aside those enumerated above, which may affect your business credit score are: the size of your company, the risks factors associated with the industry in which your business falls under, the length of your credit history and any legal or public records of your business (e.g. a case of bankruptcy)
HOW OFTEN SHOULD YOU CHECK YOUR BUSINESS CREDIT SCORE ?
For businesses where they do not have a subscribed plan to monitor their credit reports at a set time or any other scenario where your business may fall under, the question of how often one should look at the business credit score always lingers. As earlier mentioned, it is very important to check your credit score regularly to avoid all forms of errors in your report and also ensure accuracy. It is advised for every business to check their credit score at least once a year; a consistent scheduled time frame should be set to keep you updated on the state of your business credit.
For growing businesses who would want to borrow loans from financial institutions and lenders, it is advisable to sign up for a credit monitoring service or alternatively access your business credit reports on a regular basis. This is because your business credit greatly affects your eligibility for future loans and credits, therefore, accurate knowledge of where you stand in your business is expected, before submitting a business application for loans.
LAWS ON CREDIT REPORTING
Privacy acts govern business credit reports, the contents and how the data can be used. The law also dictates what loans pass for credits, the basis of goods exchange and the time duration for payment. Before now, credit reports only show bad image of business in terms of their inability to pay off debts; however, the law on credit reporting has made provisions for good credit history, showing past repayment history, and not just a default in a single payment. This balances positive and negative information and enables businesses access credit easily.
Credit report laws clearly distinguish consumer and commercial credit; while consumer credits cover loans for personal purposes e.g. home loans, personal loans and credit cards, commercial credits, however are loans for business purposes e.g. goods bought on credit for a business and business loans.
Businesses that use credit reporting range from finance institutions (e.g. banks, credit unions) to phone and utility providers (e.g. home and water). Rental, retail and hire purchase providers also have access to use credit reports.
Maintaining a good credit rating is very important for any business or individual; it does not just look good on paper, it is also essential for several opportunities in life. The three digits in your credit report will determine whether or not you get a loan for business, house or car; it can also impede your chances of landing that dream job or getting your new credit card approved.
For lenders, giving out credits to customers may attract new partners and customers, however, not looking at the credit history for such individuals poses a great risk.
It is therefore important for lenders and businesses to check credit information so as to put measures to counter any hindrance.