The new Comprehensive Credit Reporting – build a strong credit profile
You’ve likely heard about the new Comprehensive Credit Reporting (CCR), but do you know how it can effect your business?
Although the CCR is currently only applicable to individuals and not businesses, for many SMEs a good credit history of the directors is required to secure all types of funding including but not limited to mortgages, car leases, credit cards, overdrafts credit facilities with suppliers and so on. Understanding this change is critical to your business, especially for sole traders.
In short –
Previously, credit bureaus only provided limited information to lenders, generally mostly related to negative lending history. This meant lenders were only privy to your overdue or missed payment, court judgments or bankruptcy. Obviously this makes it harder for them to approve your loan if this is all they see.
Now, the new Comprehensive Credit Reporting (CCR) will include positive credit reporting. That is, that bureaus will now have to share at least 50% of your credit history data to lenders. So, while lenders will still see any negative history, they will now also have details about when your accounts were opened/closed, your credit limits, type of accounts and 24 months of your repayment history, including on-tine repayments etc.
Ways to strengthen your credit history –
- Know your credit score.
- Absolutely essential. Your business and personal credit score is provided to lenders by the credit bureaus and is factored into the risk assessment of lending to your business. There are free online tools that allow you to check your business credit score. Use one that won’t impact your current score.
- Check your business credit profile.
- Credit bureaus want the data they have on your business to be accurate. It’s up to you to ensure it is.
- Create positive relationships with your providers.
- Ensure you stick to the agreement payment terms with your suppliers. A strong relationship with suppliers with strengthen your credit history.
It goes without saying that the best thing for your business is strong personal and business credit profiles.
The best advice we can give you is to be vigilant about paying bills on time, knowing who you have signed credit applications with and especially who you have provided personal guarantees to.
We have a wealth of experience helping business owners manage cash flow and debt. We work to provide clarity and confidence in business owners in all their legal relationships – contact us today.Back