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What Can Company Credit Checks Protect You Against

Updated on June 8, 2012

While in business you constantly come across companies that have fictitious identities that are created only to create an illusion of solidity. Checking that company's credit report will enable you to verify its actual business and the transactions it conducts. You may receive orders from companies who may then delay payments because of their poor financial situation. A credit check prior to accepting the order will have warned you of this and can make you wary of accepting such orders. Ask for higher rates if you still want to take that risk. A company credit check can make sure that the vendor you entrust your money to is capable of producing the goods and fulfilling all contractual obligations. It will also help you establish those vendors who are worthy of a long term relationship that can ensure your continuity of business. It can also help you to judge the amount of credit that you can allow any of the businesses that have taken materials from you.

How Can You Gather Credit Information

There are a number of companies who are in the business of collecting and collating financial information about all the businesses in a country. Such information is very vital for checking the backgrounds of companies and their ability to do business. These credit rating agencies will rely on information that they get from various sources like credit card companies, banks and other financial institutions. They maintain huge databases that are constantly interlinked and corroborated in order that the information that they have remains reliable and up to date. Such credit rating agencies themselves have an index of reliability that will allow information to be given by them to be classified as authentic. These credit rating agencies do charge for such information and will vary their rates depending on the amount of information required. The details of information can even include reports on their various directors and owners as well as the performance of the company during the year with details of its inventories, utilization of resources, and turnover of vital staff members that can impact the future company operations.

What Can Company Credit Check Help You Do

A company's bargaining position becomes much stronger if prospective vendors are given a copy of a spotless credit report. A company credit check can also give you a lot of information about any company that you are planning to deal with, and in case you are planning to sell your business a clean credit report will vouch for your integrity and method of doing business which in turn can allow you to cash in on the goodwill that it has. You can also use such checks to check on the financial condition of any company that you are planning to invest in. A company credit check can also help you to judge whether a company that you are planning to join as an employee has any risks in its business that can affect its future and hence yours in the long run.

How Do You Build Credit

Business credit is very essential if you want to get the advantage of getting easy business loans that are a must for running a business and ensuring its expansion. If you have good business credit you will not have to look for guarantors, or to pledge assets or use credit cards that have high interest when you are looking for a loan. Registering with Dun and Bradstreet can give you a D&B number that allows you to be monitored by them and make sure that all your vendors or suppliers report your lines of credit to D&B. So if you have an increasing line of credit that is reported to D&B make sure that you pay it off every one or two months to create a firm evidence of your creditworthiness. Also ensures that all your loans are under the ID of the company and are reported as paid at regular intervals.


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