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Company Credit Ratings


It may come as a surprise but companies, like individuals, have a credit rating and the strength of that credit rating can be influenced by a variety of factors. A good company credit rating will inevitably paint a picture of a steady, long running company with a verifiable history incorporating sound financial acumen and a tangible profit margin. A poor company credit rating will portray a more risky endeavour, perhaps with a history of county court judgements or weak profitability. This article will explain some of the factors that influence company credit ratings whilst implicitly suggesting ways businesses can safeguard their own credit rating for greater financial success.

Firstly, consider the various avenues consumers and businesses can use to establish a holistic picture of a company. First Report offer an online company credit checking service which gives users access to a range of information about both a company as a whole and its individual directors. This information is invaluable when assessing the financial reliability of any business and is one of the only methods of gaining an insight into the history and present financial situation of a company.

Age of the company

A full company credit report will show the length of time a business has been established. Admittedly, this information taken on its own does not indicate a good credit rating however, if a company is both long serving and long established, it stands to reason that the business is likely to be in a positive financial situation. However, other factors must be taken into account when considering the credit risk imposed by a company.

History of Directors

First Report company credit checking services offer the facility to review the credit history associated with various company directors. This information will show whether a company director has a potted history of previous financially unsuccessful companies - and could alert users to a financially risky situation presented by a business.

County Court Judgments

A company credit report will also show details relating to any county court judgments issued in respect of a business. If, for example, a company has a history of county court judgments associated with their business, it makes sense that they present a greater financial risk and as such, the company credit rating will be negatively affected.

Adverse Public Notices

Public notices are issued in respect of businesses when legal proceedings are either forthcoming or in process. A company credit report will contain details relating to adverse public notices i.e bankruptcy proceedings or company liquidation. Any adverse public notice should alert the user that something is financially amiss within the business itself.

Late filing of accounts

All companies are responsible for maintaining a clear and concise financial record of their business dealings. If, however, a company fails to file their accounts within an allocated time frame, their credit report will suffer. This is because audited accounts provide a method by which a company can be verified and assessed as in a financially harmonious situation.

Weak Liquidity

Company credit ratings are, of course, impacted by the financial position of the business. If audited accounts convey a picture of a business that perhaps has a weak cash flow with low profitability, their credit rating will inevitably plummet. In short, a company with a good credit rating will show higher tangible assets than liabilities and will, ideally, convey a positive trend towards financial solvency. Likewise, regular incoming payments from other suppliers will provide a positive impact on a company's credit rating - meaning that all business should make it their priority to chase up outstanding payments, however small.

Size of the company

Companies with access to a range of financial resources generally impose a lesser financial risk and commonly hold an arguably 'good' credit rating. This is because companies that, in business terms, are considered 'large' have usually expanded through a history of verifiable financial success. That said, it only takes one company director with a murky financial past to negatively affect a company's credit score so business owners would be wise to run credit checks on any potential directors.

Payment of Suppliers

Prompt payment records, or slow payments, can influence the credit status. This is an example of payment records

The good news is that, like individual credit ratings, company credit records are dynamic. If your business is viewed as a credit risk today, it is entirely possible that with a few long term changes, your business credit rating might portray a more positive image of your company in the future. Chase outstanding debtors, file your company accounts on time and monitor your financial situation regularly - all of this impacts a company credit rating.

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