Credit Management CreditorWatch RiskScore
5 mins read

How to check a business’s credit score

Checking the credit of your customers and clients is a crucial part of running any business. Whether you’re providing services, products, or financing, you need a way to ensure that you can trust your customers to make good on what they owe you.

A lot of businesses take the position that running a credit rating check for every partner or client is excessive, and they base the transaction instead on their own judgement of character. You can Google a company or speak to others who have extended credit to them in the past, but without conducting a proper credit check, you are simply left in the dark. A company might give the outward impression of being on top of its finances, but a business credit check will peel back the layers to reveal its true financial position.

Business credit scores are an invaluable and comparatively affordable source of information that will save you time and money in the long run. Simply not knowing how to check a business credit score  is one reason businesses neglect this basic step, but with CreditorWatch, this doesn’t need to be a barrier. We do the groundwork for you and expose anything that may be hiding, while foreseeing what is to come.

The Importance of a Credit Check 

In December of 2021, 419 Australian companies were deemed bankrupt due to bad debt. Without checking credit, your business could end up bankrupt within seconds. It’s that quick.

Understanding the risks associated with extending credit is important to keep your finances in check. Late or defaulted payments negatively impact your cash flow and your own ability to meet obligations, resulting in out of pocket costs that you might never see again, a poor credit against your name, and even bankruptcy.

Whether you’re checking the credit of a public company, sole trader, trust, or another type of entity, a credit rating check by a reputable commercial credit bureau is a simple and effective method for reducing financial risk that should be at the forefront of any business’ financial strategy.

What’s in a Credit Rating Check? 

A credit rating check conducted for a business entity draws on all the available information pertaining to their credit history to produce a Business Credit Report. This document is intended to give you a snapshot of that entity’s financial health and ability to meet payment obligations.

Conducting a thorough credit rating check will disclose a remarkable amount of information to you. There are any number of credit bureaus that offer a credit rating check Australia wide, but none of them are able to offer as comprehensive a report as CreditorWatch.

An in-depth business credit score from CreditorWatch will include high risk indicators such as payment defaults, court actions, debt collection records and administration appointments, the lifespan of the business, company status, details of the director, address and shareholder details and cross directorships and phoenix activity.

Unlike a credit report from CreditorWatch, the average credit check may only give you a rating, such as low, fair, good, very good, or excellent. Similar to when you get a credit card from the bank, this rating is determined by past financial obligations and if they were met or not. This doesn’t mean a whole lot when compared to the comprehensive Business Credit Report generated by CreditorWatch’s RiskScore, which is backed by data from a diverse and exclusive database of sources and includes detailed analysis and predictions of future behaviour.

Checking a Business Credit Score with RiskScore 

Doing your due diligence, RiskScore takes checking business credit scores to the next level using sophisticated technology and extensive data sets to assess a business’s creditworthiness and predict the likelihood of their defaulting on a payment over the next 12 months.

Using Tradeline behavioural data from CreditorWatch’s 55,000+ customers and SME payment data from Xero and MYOB and corporate ATB uploads, this transactional information showcases repayment behaviour. Being the only Australian bureau to gather payment information directly from small businesses, this unique tool offers a reliable early warning indicator of high risk debtors.

Effectively ranking the riskiness of an entity using an A1 to F system, you can easily see creditworthiness at a glance. Complemented by business demographic data, RiskScore captures any economic stress associated with location and more. This tool also includes traditional credit risk factors such as insolvencies, court judgments and bankruptcies.

CreditorWatch Credit Reports 

Utilising AI-driven systems to conduct in-depth data research, CreditorWatch provides you with a comprehensive Business Credit Report. This invaluable information includes all the facts you need to assess whether or not you should conduct business with a company.

CreditorWatch’s credit report includes information about the business’s lifespan, their director, their business address and shareholder details. Having shareholder details is a great way to tell if successful companies back the business you may or may not extend credit to.

Another valuable feature in the CreditorWatch credit report is cross directorships and phoenix activity. This identifies directors with other failed or failing companies.

High risk indicators indicate if a business has had previous payment defaults, court actions or debt collection records. This is important information as it can tell you instantly if they are already in debt or have been before, which could be a strong indication that they may not be viable to conduct business with.

Another high risk indicator is administration appointments. This displays whether they are required to make payments upfront as their credit rating is low or they have no assets to pay their debts if things go south.

Any time a modification is made, you will be notified. This includes payment defaults, court actions, insolvency notices, mercantile inquiries, administrator or liquidator appointments, ABN/ACN changes, company status changes, directors joining or leaving a company and address changes.

Reduce the risk of bad debt

No matter the size of your business, conducting a check of your customers’ business credit scores should be a standard procedure.

With advanced debt management systems that include monitoring and alerts, CreditorWatch’s credit rating tools are easy to use and integrate into your ongoing business structure. Simply sign up for a free trial and start making smarter decisions that will help to grow your business. 

Head of Content
Michael joined CreditorWatch as Head of Content in July 2021. He has more than 20 years’ experience in business journalism, marketing and communications strategy and digital content development. He is passionate about communicating to the business community how CreditorWatch’s product suite can help them grow and protect their companies.
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