How to Check Your Customer's Business Credit Report and Score (2024)

Did you know over 36% of businesses don't run credit checks before signing contracts with new customers, leaving themselves open to financial risk? Additionally, 26% of businesses admitted that they don't run credit checks on current customers either, missing out on a key metric for financial planning and ensuring long-term stability.

Understanding and regularly checking your company's business credit score and report is essential for maintaining financial health, securing favorable financing terms, and building trust with stakeholders. A credit score is a numerical value that evaluates the financial health of a business and the likelihood of that company entering bankruptcy in the next 12 months. If you are not checking this, you are opening the door to potential problems later down the line.  

When you're sizing up a supplier or customer's business credit report, it's crucial to zoom in on the right metrics and know what they're telling you. Here's the lowdown on what to watch for: 

• Business Credit Score: This number is like a financial report card, telling you how trustworthy the company is when it comes to paying its bills. The higher the score, the better. A solid credit score usually means smoother transactions and less risk of late payments. Keep an eye out for any sudden drops or big fluctuations, which could signal financial distress. 

• Credit Limit: Think of this as the maximum amount of credit the company can afford to take on at any one time. It shows the upper limit of borrowing capacity that we believe the company can handle. A high credit limit suggests they have significant financial strength but be cautious if they are frequently maxing it out. This could indicate an overreliance on credit or difficulty managing expenses.

• Days Beyond Terms (DBT): This metric shows how many days, on average, a company pays its bills past the due date. If the DBT is creeping up, it could mean they're having cash flow issues or just not keeping up with their financial commitments. Aim for a low DBT to ensure smoother cash flow in your own dealings with them. By ensuring swift payments, you demonstrate to credit agencies and your suppliers that you are a reliable payer, which can help when negotiating terms and lines of credit.

• Late Payments: It's pretty straightforward: this tells you how often the company misses payment deadlines. Frequent late payments could indicate financial instability or poor management of resources. Keep a lookout for any patterns of chronic tardiness, as it might spell trouble for your own accounts receivable. 

• Legal Filings: This is where you find out if the company has been in any legal tangles like liens, judgments, or bankruptcies. While a few legal hiccups might not be a deal-breaker, a laundry list of them could be a red flag. Dive into the details to understand the nature of the filings and assess the potential risks they pose to your business relationship. 

By zeroing in on these metrics, you'll get a clearer picture of your potential partner's financial health and be better equipped to make informed decisions about your business dealings.

When you're diving into your customer's business credit report, it's like having all the pieces of the puzzle already put together for you. Unlike the slow process of gathering trade references or bank references, or sifting through financials, our credit report provides all this information in one place. It’s amalgamated into a credit score, giving you an instant understanding of the business's health. Plus, having all the data in one place allows you to easily identify trends and make informed decisions with confidence.

With a business credit report you can take a deep dive into various metrics looking at the company’s financial health over the last 3 years. Don't just skim through a couple of numbers, look for trends. Why? Because trends matter. If there's something off with a company's cash flow, it might reflect in how promptly they receive payments. Your analysis of the business credit report becomes much more effective when you examine key metrics over time. Constant fluctuations can serve as crucial signs of financial struggles and act as reliable indicators of whether a company is a sound choice to do business with. So, the next time you're delving into those credit reports, don't narrow your focus to just one aspect. 

At Creditsafe, we offer comprehensive business credit reportson companies worldwide, simplifying credit risk management. Our business credit reports are tailored to facilitate quick credit assessments, whether you're extending credit, offering leases, or renegotiating contract terms.

• Saving Time: Using a credit monitoring service can save you significant time and effort.

When managing numerous clients, manually checking the credit reports for hundreds of customers is impractical. A monitoring service like Creditsafe’s allows you to set up custom rules based on specific criteria you want to be notified about. You receive automatic alerts when these conditions are met, ensuring you stay informed without the need for constant manual checks. This automated approach saves you time, allowing you to focus on other important aspects of your business while still effectively managing credit risk.

• Assessing Financial Health: Regularly checking your customers' business credit helps you gauge their financial stability. For instance, if a long-standing client suddenly sees a significant drop in their credit score, it could indicate financial troubles. 

Suppose you're a supplier who notices a decline in a client's credit score. In that case, it might prompt you to reconsider extending large lines of credit until they stabilize their finances, safeguarding your business from potential losses.

• Managing Credit Terms: Monitoring business credit allows you to manage credit terms effectively. 

Let's say you're a service provider who typically offers net-30 payment terms to your clients. By keeping an eye on their credit reports, you might notice patterns of late payments. Armed with this information, you can adjust your credit terms accordingly. For instance, you might shorten the payment window to net-15 or require a deposit upfront for high-value projects, reducing the risk of payment delays and improving cash flow.

• Identifying Red Flags Early: Early detection of financial issues can save your business from significant losses. 

You may be a lender considering extending a loan to a small business owner. By checking their credit regularly, you notice a sudden increase in delinquent accounts. This alerts you to potential cash flow problems or mismanagement. Armed with this knowledge, you can engage the client in discussions about their financial challenges and work together to find solutions, mitigating the risk of default and preserving your investment.

• Protecting Business Interests: Monitoring business credit is essential for safeguarding your company's financial interests. 

For example, suppose you're a landlord leasing commercial space to a retail tenant. Regularly checking their business credit can reveal any liens or judgments against their business. If you discover significant financial issues, you can take proactive steps such as requesting a larger security deposit or tightening lease terms to mitigate the risk of non-payment or property damage, protecting your investment and ensuring a stable revenue stream. Additionally, monitoring business credit can also help identify potential business partners or clients with a history of financial instability, allowing you to make informed decisions about collaborations or contracts. By staying vigilant and proactive in monitoring business credit, you can better protect your company's financial interests and maintain a strong and secure business environment.