If your business provides credit, you are inviting an element of risk into your commercial engagements. Your business success relies on your customers paying their debt on time. Therefore, you should conduct due diligence about the person you are providing credit for to ensure that you are making a prudent investment. One way to reduce risk is to check the credit score of the individual or entity you are about to do business with. When you have a legitimate purpose, you can check the credit scores of:<\/p>\n\n\n\n
This article will go through how you can check your business debtors\u2019 credit scores in New Zealand.<\/p>\n\n\n\n
A credit score is a number that represents a person or company\u2019s creditworthiness. This credit score is usually a number between 0-1000, with lower numbers indicating worse credit. A good credit score usually falls between 500-700, and this number indicates your debtors\u2019 likelihood to keep up with their payments.<\/p>\n\n\n\n
Based on various algorithms and calculations, the value of a credit score takes into account the entity’s:<\/p>\n\n\n\n
For example, if a customer has a history of repeatedly failing to pay their debt on time, this will lower their credit score. Checking your credit record multiple times can also lead to a lower score.<\/p>\n<\/div>\n\n\n\n
This score relies on information about repaying debts for the past two years and any outstanding debt recovery attempts in the past five years. Important information, such as identification details and multiple bankruptcies, remain attached to this score indefinitely.<\/p>\n\n\n\n
If your business provides credit, it is generally good practice to check the credit scores of whoever you give this credit to. You may provide credit if you deal with:<\/p>\n\n\n\n
You need to get the written consent of the party you are investigating in most cases unless you are a public sector agency or debt collector. <\/p>\n\n\n\n
It may be more efficient to run a quotation inquiry instead of a credit check in some cases. This is when you provide a preliminary quote of any loan terms for your debtor before you enter contractual relations. It will vary, but you will still be able to access your potential debtor\u2019s relevant financial information to determine the value of the quote. Such an inquiry does not affect the value of a future credit score. If you use risk-based pricing, you need to conduct quotation inquiries instead of credit checks. This is where you charge higher interest rates on riskier engagements.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n