Importance of Monitoring Your Business Credit Report

How to Monitor Credit Report

A good credit rating is an excellent standing for any business. With it, you are allowed into the exclusive club of financial resources. You attract better terms, better payments, and stand a better chance of winning significant deals. Did you know that a good credit score goes beyond helping you to be accepted by lenders? With a good score, you are empowered to achieve a host of other business-related goals, such as negotiating on equal terms and getting the best price. Other businesses respect you too. You can access services and goods without having to pay for them beforehand. There is a twist in the tale, though. Many people may have made efforts to maintain the right name with credit scoring agencies but do not know how to monitor their business credit score continuum. This article seeks to bring you up to speed on how to track your business credit performance. You will also learn more about good credit reporting.

The Facts about Credit Scores, Reports and Tracking the Same

Businesses also have credit scores. When you legally register a business and make it a corporation or a Limited Liability Company - LLC, it acquires its own life and is scored separately. It's easy to check your credit scores because you can do so online.

What is a Credit Score?

credit score is a value derived from a history of credit usage by a person or business. It is usually denoted in three digits. Ideally, the figure reflects the likelihood of paying back a debt. It is used by financial institutions and other lenders to determine the level of risk they are getting into when they engage a customer for lending purposes. The phrase 'good credit score' means that you are responsible whenever you are lent money. It implies that you repay your debts on time. Therefore, it is a recommendation for your business to lenders.

Credit Report

credit report is a detailed analysis of your business credit status. It is a breakdown of your business borrowing and repaying history. Countries have their credit bureau, which arranges the details in their preferred ways. Lenders use credit reports to determine the risk of lending.

Credit Monitoring in Malaysia

So, How Does Your Business Credit Score Different From Your Personal Credit Score?

While your personal credit score may sometimes suffice when considering your overall credit plight, e.g. when you are seeking funding from a bank or when engaging suppliers, the two are separate entities and remain as such, legally. There are some similarities, but the business credit score only focuses on your business. Business credit scores are also normally available for public scrutiny. Both scores help lenders to analyze the level of risk of the borrower as mentioned on our previous post on the importance of business risk management. The scores also determine the amount of funding that the lender can extend, and at what interest rates. The rule of firms with business credit scores is that the higher the score the better, and the more positive your business credit worthiness. While personal credit scores range from 300 to 850, business credit scores range from 1 to 100. The highest figure indicates excellent credit standing while 1 signals the poorest credit worthiness. In business credit scoring, a figure of 75 and above is considered impressive

Credit Monitoring - the Broader Picture

The importance of credit reporting in Malaysia goes beyond just seeking to have good standing with lenders. You may also want to have credit information of others so as to know who to trade with. Monitoring your own business credit helps you share the information with potential partners too. We have mentioned previously on how to monitor credit information you can check out here. Some of the information you get when you request for your business credit report includes

  • The company profile, including the organization's summary of the profit and loss balance sheet over a 5-year period.
  • The ROC company data including its subsidiaries and associated businesses
  • Corporate updates from SSM
  • Updated business profile based on the latest available data
  • Business profile for individual business including their position on the market, interest in shareholding spheres, addresses and secretaries of the company and their and affiliates.

Conclusion

The information you get from a business credit report may not be spot-on. There are times when you need to get a second report from a different credit reporting agency; just to be sure it reflects the latest state of affairs. Monitoring your business credit report is important because, then, you know what you need to do to enhance your business. A credit report is like a report card given to a learner in school. It helps them strategize how to up their grades in the coming seasons. Similarly, when a business is kept abreast with how it is performing on the credit rating front, the managers have a chance to review the train of progress and recommend policies that improve their market hold. If the report shows exemplary performance, it means that the business can easily access new and bigger financial avenues that allow it to expand further.

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