Daily Archives: August 2, 2013

The Importance of Credit Reports

The Importance of Credit Reports

What is a credit report and what is its importance to a business owner? These are very important and essential questions that every business owner in South Africa should know the answers to. A credit report for a business owner is when your business evaluates the credit risk of a potential client. The credit information provided by the potential client will help the business owner decide whether or not they are willing to provide the client with goods and services on credit. This is essentially giving the business a glimpse into how much trust will be placed on the client.

All credit applications should be in line with the National Credit Act of South Africa. All potential clients to a business should be required to submit a credit report and random checks should be made on current clients to ensure consistency and honesty. Consider the credit report to be like an interview that needs to be aced before you can be offered the job. It is a necessity that the client needs to complete in order to prove they are worth the risk.

Why should any business owner require a credit report for any potential client? There are many things that can go wrong if a business owner fails to check on every client. Client non-payment is a possibility with someone that hasn’t been properly checked out. If a credit report were to come back with hints of potential issues, the business owner can them decide to deny, or adjust the terms of contract. Any business owner can be proactive about potential monetary issues that could happen. Any type of non-payment can negatively affect the cash flow of a business and that could directly affect the success of the business.

As a business owner, surprises are not exactly welcomed. With proper credit reports on all potential clients, you will know what to expect based on the client’s financial history and prior practices. You can instantly determine whether you want to take the risk on a client or if there are more steps you want to take before you do business with them.

The bottom line is to ensure that every client you take on is given a credit application and the information you receive from it is used to further guarantee the stability and success of your business. Be proactive and you will not be caught off guard by payment issues.

What Is A Credit Check

What Is A Credit Check

Credit checks are an account of a person or an organization’s financial history. It is an indicator of the financial well being of an individual or a business. Credit checks are conducted across the world, by private as well as state owned organizations. Companies like TransUnion do credit checks of companies as well as individuals across several countries. Credit checks play an important role in determining the financial health of a person or business.

What Is A Credit Check?
In simple words, a credit check is an analysis of a person or a company’s debts, financial assets and history of loans and their subsequent repayments.

When a person or a business takes a loan, there is a repayment schedule. If a person or a business continues to repay the loan or the debt according to the repayment schedule, in due amounts without any fail, lapses or delay, then one enjoys a healthy or a good credit rating. The entire financial history of loans and debts along with their subsequent repayments is known as credit history.

A person or a business can have good credit, average credit or poor credit, depending on the history of repayments. People or companies who have defaulted any repayment of loans or have debts impending would be classified as having poor credit. People or businesses that have certain lapses in their financial history but not to the extent of defaulting loans or having debts unpaid or unsettled would have an average credit history. People or businesses would only have good credit ratings if they have not failed in any repayment, have manageable, insignificant or no debts at the present point in time and have sound financial assets.

Significance Of Credit Checks
Generally, credit checks have no major significance in a person’s life or a company’s existence. Credit checks become the most important factor when a person or a company tries to apply for a loan or seeks credit from any lender. The lender may be a bank or state owned institutions or private lenders. A person or customer with a good credit rating is a desirable client from lenders while people or companies with average credit ratings are treated with caution and less enthusiasm. People or companies with poor credit history or poor credit ratings are mostly not eligible for loans and credits from banks or even nonbanking financial corporations.
Thus, it is essential that people and companies undergo credit checks by TransUnion and be aware of their present credit rating. It is also necessary to maintain a good credit history to be eligible for loans and other financial products.

To have a credit check done on yourself, click here.