Credit Credit control Credit Management Credit rating Credit Reports Credit Risk
5 mins read

What is a credit report?

Q: What is a credit report?

A: A credit report is a detailed record of a business or individual’s credit history, which includes information about their credit accounts, credit inquiries, and payment history. This report is compiled by credit reporting agencies, such as CreditorWatch, based on the data provided by lenders, credit card companies, and other creditors.

Lenders and businesses extending credit use credit reports to evaluate a business or individual’s creditworthiness and determine whether to approve a loan or extend credit.

Why do credit reports matter?

You might ask yourself, what is a credit report and why is it important? Credit reports are important because they are used by lenders and businesses extending credit to assess a business or individual’s creditworthiness and financial stability. When a business or person applies for a loan or credit, the lender will review their credit report to determine the risk associated with lending to them.

Credit reports provide a detailed history of a company or individual’s credit applications, payment history and other financial information. This information is used to calculate the individual’s credit score, which is a numerical representation of their creditworthiness.

A high credit score indicates that the company or individual has a strong credit history and is likely to be a responsible borrower, while a low credit score suggests a higher risk borrower.

CreditorWatch’s credit scoring system, known as RiskScore, ranks businesses from A1 to F based on unique data from more than 11 million trade lines from corporate ATB uploads and Xero and MYOB integrations, as well as traditional credit risk drivers such as ATO tax debt defaults, court judgments, bankruptcies and insolvencies.

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.

Having a good credit score is important as it can make it easier to obtain loans, credit cards, and other forms of credit, and may result in lower interest rates and better terms. On the other hand, a poor credit score can make it difficult to obtain credit or result in higher interest rates and less favourable terms.

It is important for businesses and individuals to regularly review their credit reports to ensure that the information is accurate and up to date. Errors or inaccuracies on a credit report can negatively impact a credit score and the ability to obtain credit.

What are credit reports used for?

Credit reports are used for a variety of purposes, including:

  • Lending and credit decisions: Lenders and businesses extending credit to customers use credit reports to view their credit history and evaluate the creditworthiness of a business or individual and determine whether to approve a loan or extend credit.
  • Renting: Landlords often use credit reports for credit reference checks to evaluate a prospective tenant’s financial stability and determine whether to approve their rental application.
  • Insurance: Insurance companies may use credit reports to evaluate the risk profile of a business or person and determine insurance premiums for policies such as auto or homeowner’s insurance.
  • Utility services: Utility companies often use credit reports to determine whether to require a deposit or establish credit terms for new customers.
  • Identity verification: Credit reports can be used to verify an individual’s identity in situations where identity theft or fraud is suspected.

Who can access credit reports?

Credit reports are maintained by credit reporting bureaus and can be accessed by authorised entities for certain purposes. Here are some of the entities that can access credit reports:

  • Creditors: Banks, credit unions, finance companies, credit card companies and other lenders can obtain credit reports to evaluate an individual’s creditworthiness before making a lending decision.
  • Landlords: Landlords may access credit reports as part of a background business or personal credit check when considering a tenant’s rental application.
  • Employers: In some cases, employers may obtain credit reports as part of the pre-employment screening process, particularly for roles that involve handling sensitive financial information.
  • Insurance companies: Insurance companies may access credit reports to see an individual’s credit history and help determine their risk profile for certain types of insurance, such as car or home insurance.
  • Government agencies: Some government agencies, such as the Australian Taxation Office (ATO) may perform credit checks reports for tax collection purposes.

It’s important to note that entities must have a permissible purpose under the law to access credit reports. They must have a legitimate reason for accessing the information and cannot use it for illegal or unethical purposes. Individuals can also access their own credit reports to review them for accuracy and potential errors.

Can you access other people’s credit reports?

In Australia, there are three major credit reporting bureaus that maintain credit reports: CreditorWatch Equifax and illion (formerly Dun & Bradstreet). CreditorWatch specialises in business credit reports whereas Equifax and illion produce reports on consumers as well as businesses. To access the credit report of an individual you must have their express consent. When applying for credit with a financial institution for example, the authority to access your credit report is written into the terms and conditions.

With a CreditorWatch subscription, you can access the credit reports of more than a million Australian businesses. 

What are the different types of credit report?

There are two types of credit reports that are typically used by credit reporting bureaus:

Consumer credit reports: These credit reports include information about an individual’s credit history such as their payment history, outstanding debts, and credit utilisation. They also include personal information, such as their name, address, date of birth and historical information such as repayment history, credit applications and bankruptcies.

Business credit reports: These credit reports contain information about a business’s credit history including its payment history, outstanding debts, payment defaults and credit enquiries. They also include information about directorships, court actions, the business’s ownership structure, date of registration and address.

In addition to these types of credit reports, there are also specialised credit reports that focus on specific types of credit reference checks such as mortgages or car loans. These reports may include additional information specific to that type of credit, such as the amount of the loan, the interest rate and the payment history.

Where should you go to find more information about obtaining a credit report?

If you are wondering how to do check a personal credit score in Australia, you can go to one of the consumer credit bureaus such as Equifax, illion or Experian.

Business credit reports on more than a million Australian businesses can be accessed through a CreditorWatch account. You can sign up a free trial here. No contracts and cancel anytime.

credit credit management credit reporting credit reports credit risk credit risk management credit score finance small business SMEs
Business Development Specialist | Credit management and Collections
Sarah is a highly experienced business risk, credit management, collections and business development specialist with over 10 years of experience. She is an expert in identifying and mitigating risks and has helped numerous businesses gain a deep understanding of the latest trends in credit management. Sarah’s recent work includes writing about high-risk businesses and how to identify them and providing insights on using a risk assessment tool like CreditorWatch’s RiskScore to make informed decisions. She also emphasises the importance of performing due diligence on new clients to assess their credit risk and mitigate cash flow risk. Additionally, Sarah has also written about cash control and how to improve debtor management. Sarah’s recent work includes writing about high-risk businesses and how to identify them and providing insights on using a risk assessment tool like CreditorWatch’s RiskScore to make informed decisions. She also emphasises the importance of performing due diligence on new clients to assess their credit risk and mitigate cash flow risk. Additionally, Sarah has written about cash control and how to improve debtor management.
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