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How is a credit score calculated?

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What is a credit score?

Whether you’re the owner of a small, medium or large business, a credit score is a vital source of information to help avoid bad debt. A credit score helps lenders understand and assess the creditworthiness and credit risk of potential and existing debtors.

In this blog, we will delve into what a credit score is, how it is calculated, and how to best use it to protect your business from exposure to credit risk.

How is a credit score calculated? 

Collating multiple data points and your credit history, a credit score calculates a person’s credit worthiness for the prospect of credit. Taken from lenders and creditors, this collection of data is used to create a numeric formula which establishes your credit score and therefore your credit risk to potential creditors.

The data used comes from the types and amounts of credit accounts a business or individual has, any used credit and available credit, the length of credit history and payment history.

CreditorWatch’s credit score, known as RiskScore, is calculated from more than 50 private and public data sources (including ATO tax debt default data, ASIC reports, credit enquiries, and court data) and exclusive trade payment data from Xero and MYOB, more than 11 million trade lines.

Used to make decisions on the worthiness of a loan or extending credit, a credit score helps to determine if a business’s financial health is good or not and ultimately protects your business. It can be the be-all and end-all of loan approval and can also affect the interest someone is charged – being less or more expensive, depending on the score.

What is a good credit score? 

The higher the score the better the credit is to potential creditors. Credit bureaus suggest that five or more accounts can enhance a credit rating – given they are paid in a timely manner. This can be a mix of cards and loans.

Credit score depletion can be caused by making late payments, having a high debt to credit utilisation ratio, applying for a lot of credit at once, having a large unpaid tax debt with the ATO, closing a credit card account or stopping your credit-related activities for a long period of time.

Get the most accurate credit score with CreditorWatch 

Generated with CreditorWatch’s extensive and unique data sources, our RiskScore contains historical data and predictive analytics. We provide you with a numerical credit score between 0-850. This is combined with a riskiness rating that ranks entities with one of 14 credit ratings – from A1 to F. This makes a CreditorWatch credit score check more comprehensive than your average credit score.

Whether your business is small or large, conducting a thorough credit check is affordable, accessible and accurate with CreditorWatch. Unmatched in the credit bureau game, our innovative management tool RiskScore provides you with gathered information to assess the risk level of a business.

Using tradeline behavioural data through our 55,000+ customers to deliver over 11 million monthly trade lines from small, medium and large businesses, RiskScore is unique in its business-to-business transaction data. Including both positive and negative repayment behaviour, RiskScore utilises ATB uploads and SME data from Xero and MYOB.

With added business demographic risk data, RiskScore includes geographic risk clusters that capture any economic stress associated with a business location. It also includes the standard credit risk drivers of court judgments, bankruptcies and insolvencies.

The most comprehensive and accurate credit score on the market, our business credit scores provide you with the facts to make better decisions and reduce bad debt. We are the only Australian bureau to gather payment information directly from small businesses, making CreditorWatch the best way to conduct a check credit score Australia wide and globally.

Reduce and avoid bad debt 

Helping you to make better decisions and reduce bad debt, a CreditorWatch RiskScore is the most comprehensive way to obtain a business credit score. Generated with CreditorWatch’s extensive and unique data sources, contact us today to see how our credit scores are a cut above the rest.