Credit checks have become a vital tool for all growing businesses. It has led to efficient decision-making and growth for many firms. However, there are still many businesses that are not aware of how often these credit checks should be conducted. They lack knowledge of why credit check should be conducted in the first place.
In this blog, we will be answering all these questions. Mainly we will be focusing on how often you should conduct a business credit check. And why business credit checks should be conducted at the said times. But for those who have no clue what credit checks are let us explain.
Understanding Business Credit Reports
Credit checks refer to business credit reports being used to calculate a credit score. Just like personal credit business credit reflects your credit transactions and creditworthiness. This is mostly looked onto by lenders or other creditors to make sure your business is reliable. In simpler terms, it is the token to get a loan. Apart from that your credit score determines the interest rate you will be charged and potentially opens room for more growth.
If you are looking for a Professional Experian Business Credit Check then our services are what you need. With a fast and accurate credit check, you can find out whether your business is at risk and needs to be worked on. It all comes down to your credit score. If it ranges above 75 out of 100 then you are good to go.
How Often Should You Conduct a Credit Check
There is no set rule on how many times to conduct a credit check. Every business has its way of doing things. The rule of thumb is to conduct a credit check after every quarter which makes it 4 times a year. It is preferred that you do so because credit entries change every day and they are significantly updated over 3 months. Hence knowing where you stand by the end of the quarter is necessary. It also makes it easier to find where your business is lacking and needs help.
Regular checks over the intervals are one thing but other scenarios require credit checks. These scenarios are not confined to your business alone but to other businesses that you might want to associate with in the future. These circumstances are constant throughout a business life and credit checks make sure the business does not take a fall. Let us take a look at a few of these occasions.
Before Applying For a Loan
This is the most important time when you want to know where your business stands credit-wise. Lenders like banks look at your credit score and finalize whether they want to give you a loan or not. If you already conduct a credit check before applying for a loan you will be prepared for the hurdles that might follow. You would have a brief idea about if you will get approved and what terms would be set. Moreover, you could also take some time out and work on areas of errors that would improve your credit score.
When Considering Partnerships
Before signing a new agreement you would want to know what is your potential partners’ financial position. You can not blame someone for knowing if their partner is trustworthy or if they have been bankrupt in the past. All of this information is available through credit reports. You can see their credit score and conclude whether this partnership would be beneficial for your business or not. This is necessary for long-term relationships as you would not want a risky partner for a long time. However, this does not mean that there is no need for credit checks in short-term partnerships.
Monitoring Credit Health
Just like your personal health and routine checkups a business also needs that to stay healthy. You can conduct credit checks to know whether your credit score is improving or not. If it is not regular reports would make it easier to find the error. This would help your business with not falling down the scoreboard to the point where there is no recovery.
If you want to monitor your business’s health then use our Experian Smart Business Reports. These detailed credit reports keep you on track of your credit health ensuring a smooth loan-receiving process.
Changes in Business Environment
Economic depression, market changes, and industry turmoils all affect business owners significantly. In these situations, you must run credit checks on your partners to know if they can fight these circumstances. Moreover, you can find the credit impacts they have on your business. For instance, a change in market demand may reduce your sales hence making you unable to pay your creditors.
Why Conduct Credit Checks
The only reason you conduct credit checks is to see whether your credit score is healthy or not. A healthy credit score can take your business a long way. And to maintain that healthy credit score you need to:
- Pay your creditors on time
- Minimum credit inquiries
- Small age of credit
- No legal barriers
If your business does not have a positive credit score its chances of receiving loans are low. And if they do receive loans the interest rate charged would be high. Having a low credit score reduces reliability hence constant credit checks are made to ensure the business does not fail.
Conclusion
Credit checks play a crucial role in the success of the business. To secure capital through loans it is necessary to have a positive credit score and it can fall significantly if not maintained over time. Hence do not hesitate to check your credit score over time. Choosing the right company to calculate your credit score is as important as the procedure itself. Any wrong interpretation of your credit score could cost your business a lot.
At last many scenarios require credit checks. It is your responsibility to conduct them to ensure your business does not take a risky turn. A safe business is a healthy business.
