What is a Company Credit Report?
A CCR is a complex report describing the financial standing of an entity that was created using data from several credit institutions. Lenders use this report to determine an organization’s creditworthiness prior to making a loan offer. An average CCR includes:
- Background Information – The report begins by providing background information about the company, such as its parent and subsidiary firms, ownership, number of years in existence, etc.
- The CIBIL Rank of the firm is also mentioned in the report. This is a one-digit number that ranges from 1 to 10; the closer a company’s rank is to 1, the better its credit health is. It is the equivalent of a person’s CIBIL score.
- Financial Information – The report then provides additional financial information that helps lenders decide the proper credit limits that they may grant borrowers.
- Financial History – A CCR also provides a summary of the company’s financial history, which covers payments made, money collected, how much money was made, and more.
What variables affect a Company Credit Report?
1. Length of Credit History – A CCR’s length of credit history is also a factor in determining an individual’s credit report. The better it is for your business’s credit report, the longer the credit history.
2.Size and Life of the Company – Older companies are probably going to have better CCR ratings than start-ups. This is due to the fact that established businesses with steady development should have a higher level of credibility than startups and smaller businesses.
3. A company’s credit utilization ratio (CCR) operates similarly to an individual’s. A corporation is viewed as being credit hungry and is hence deemed less creditworthy if its available credit is used up more quickly.
4. Outstanding Debts – When calculating your CCR, CIBIL takes into consideration the total amount of debt you have with various credit organizations. Therefore, it’s crucial to retain just manageable quantities outstanding.
5. Repayment History – To keep their business operations afloat, companies must take out a number of loans and make EMI payments. A firm or a person should always make prompt payment of any overdue balance.
Pay The Bills For Your Company On Time
The key to raising your personal credit score is timely repayment of credit card and loan EMIs. Similarly, corporate credit scores are accurate. When you apply for a business loan, line of credit, or credit card, your credit score will suffer as a result of late payments.
Making on-time payments for your debts is one of the greatest strategies to raise your credit score. Your credit score drops when you default, make late EMI payments, or bounce checks. Maintaining positive relationships with suppliers and other creditors is facilitated by timely payment of the business’s debts.
Plan to have Lower Credit Balances
Maintaining a credit utilisation ratio of no more than 30% for your company is a recommended strategy. Let’s assume you received an OD from your bank for Rs. 10 lakh. The maximum amount of credit that should be used at any given time is 30%, or Rs. 3 lakh. It is wise to pay back the loaned money before making any more withdrawals, for example, if you have already taken out Rs. 3 lakhs from the authorized OD limit.
When your credit use rate exceeds 30%, your credit score begins to decline. Your credit score might improve if you pay off the loan on time, even if you have to withdraw a bigger sum.
Check your Credit Report frequently and report any errors
If you are one of the countless business owners who does not frequently monitor the credit ratings of their firms, you need to correct this error. CreditMantri offers a free credit score check for businesses. You may quickly obtain your most recent credit score and a thorough credit report by providing a few simple company facts. As a company owner, you ought to routinely check your business credit record. Watch out for inconsistencies or mistakes. Your company’s rating may be impacted by even a little error in the credit report, such as an erroneous cellphone number.
Pay your Bills Promptly
One of the simplest methods to enhance your credit score is to pay your creditors on time, including lenders, suppliers, utility providers, and landlords. You may need to juggle your cash flow to make your payments ahead of schedule, but even a few days may improve your credit score.
Here are some pointers to help you make timely payments:
- Organize your payables in a spreadsheet.
- For recurrent expenses like utility bills and monthly loan repayments, set up automated online payments.
- As soon as you receive an invoice, file it. You should also set calendar reminders to pay your bills on time.
- Set aside one day every week to pay bills by hand.
Keep Business Debt Levels Low
Credit card balances, term loans and other credit lines are all liabilities on your credit report. The more loans you take, the more negative is the effect on your business credit score. Lenders generally do not sanction loans to businesses that have plenty of outstanding debt. To improve your credit score, try to repay older loans, as quickly as possible.
Keep Old Business Credit Cards Active
Your credit score is greatly influenced by your credit history. An older credit card or other credit account is a sign of stability and demonstrates the confidence your suppliers and vendors have in your company.
The larger the influence on your credit score, the older the credit account. The linked credit history is removed when an old credit card is cancelled. As a result, this information cannot be taken into account when determining your credit score. Close the most recent cards first to minimize the damage on your credit score if you have several business credit cards and wish to cancel a few of them. Make sure to notify the credit bureau right away if you find any errors or discrepancies on your credit report so that it may be corrected as soon as possible.
Take a Quick Business Loan and Repay the EMIs on Time
Though it might sound odd at first, bear with us. Your ability to appropriately manage credit is demonstrated to the credit bureau by taking out a short-term business loan and paying it back on time. You can improve a low credit score by doing this. However, before using this advice, be sure that you have paid off previous loans.