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3 mins read

How to check a business credit score

Before you engage with any new customers or suppliers, you must do your due diligence around the payment behaviours of that business. One of the easiest and most effective ways to do so is to check a business’s credit score, as this is the benchmark for its financial health. 

What is a business credit score? 

A business credit score is a number that represents the creditworthiness of a business based on its past payment behaviour (both good and bad). A business credit score is calculated by assessing the information detailed in a business credit report and typically collated by a credit reporting agency or credit bureau 

business credit score is typically updated to reflect any new information within 30-45 days. However, this timing is likely to fluctuate, as each business, lender and bank may report the payment behaviour of entities to a credit reporting agency at different frequencies.  

Why should you check a business’s credit score? 

Lenders, suppliers and creditors use business credit scores to assess the potential risk of extending credit or engaging in a financial relationship with another entity. By checking a potential customer or client’s credit score before extending credit, your business will conduct high-level due diligence to mitigate the risk of financial hardship and stagnant cash flow.  

  • Customer due diligence 

Knowing whether a company has an excellent or poor credit score ahead of time means you can make better, data-driven decisions about whether or not to extend credit. This procedure is a fundamental component of customer due diligence. For example, a business with a low credit score is more likely to make late payments or miss payments entirely based on its credit history.  

  • Protect cash flow 

You must check the credit score of any business you may engage with to protect your cash flow. A good to excellent business credit score is associated with a reliable payment history and responsible financial management. By dealing with businesses that have a positive credit score, you reduce the risk of late payments, ensuring a stable cash flow for your operations. 

  • Monitor for red flags 

Further, you can continue to monitor a business’s credit score and payment behaviour as an early warning system for financial red flags. If a company’s credit score starts to decline, it could signal underlying financial difficulties. You may choose to adjust payment terms or speed up collections in response.  

How do you check a business credit score? 

Checking a business’s credit score is as simple as requesting this information from a credit reporting agency like CreditorWatch. Our credit reports provide businesses with essential information to help you conduct due diligence on new and existing customers, including: 

  • CreditorWatch’s RiskScore. 
  • Number of credit enquiries. 
  • Defaults registered against the company. 
  • ATO tax defaults. 
  • Court actions. 
  • Cross-directorship information. 
  • ASIC notices published against the business. 
  • Other important adverse data. 

RiskScore indicates a business’s likelihood of default in the next 12 months. Entities are ranked on their riskiness with a numerical score from 0-850, a credit rating from A1 to F, and a risk category designation. The higher the numerical score and credit rating, the lower the risk the entity poses.

Credit RatingRisk CategoryRecommendation
A1, A2, A3Very LowEntity has a very strong aptitude to meet credit commitments. Extend terms within consideration.
B1, B2LowEntity has a strong aptitude to meet credit commitments. Unfavourable economic conditions may lead to a weakened capability to meet financial commitments. Extend terms within consideration.
B3, C1NeutralEntity currently has the aptitude to meet credit commitments. Unfavourable business, financial, or economic conditions may impair ability to meet financial commitments. Extend terms and monitor ongoing payment behaviour.
C2AcceptableEntity has an adequate aptitude to meet credit commitments. Unfavourable business, financial, or economic conditions will likely impair the capacity or willingness to meet financial commitments. Extend terms, and closely monitor ongoing payment behaviour.
C3BorderlineEntity is vulnerable and the aptitude to meet credit commitments is dependent upon favourable business, financial, and economic conditions. Trade with caution, closely monitor and consider your payment terms.
D1, D2, D3HighEntity is currently highly vulnerable. COD trading is highly recommended.
EImpairedEntity is currently highly vulnerable to non-payment and default. Trading eligibility must be considered.
FDefaultEntity has become insolvent or does not have the ability to trade.

CreditorWatch’s RiskScore, available in all credit reports, is the gold standard in assessing a business’s creditworthiness. With RiskScore, it’s never been faster to access company credit information in one streamlined platform.  

Check business credit scores with CreditorWatch 

As you can see, checking a business credit score is crucial for proactive customer due diligence. It provides the necessary information to protect your cash flow, reduce exposure to late payments, and make informed decisions that contribute to the long-term financial health of your business. 

Get in touch today with our friendly team at CreditorWatch. Learn more about how we can help you check the credit scores of new and existing entities and conduct high-level risk mitigation. 

credit credit check credit management credit risk credit score creditors CreditorWatch finance risk risk management RiskScore
Sarah Oliver
Marketing Coordinator
Sarah joined the CreditorWatch marketing team in May 2023, bringing with her a strong passion for helping businesses and individuals navigate the intricate world of credit through strategic marketing and effective communication channels.
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