The credit report
A credit report, sometimes also called a business report, provides information about the financial status of a company.
Credit report - Index
Definition of credit report
The importance of a credit report
A credit report can be a decisive factor for many companies when deciding to engage with another business. Just as an employer often Googles a potential employee, a company requests a credit report on a potential supplier or customer. Altares Dun & Bradstreet prefers the term "business report" for these reports because they contain much more information than just a credit score. This report can be used more efficiently than solely for assessing creditworthiness. These D&B reports typically include the following elements:
- Company details
- Risk assessment
- Advised credit limit
- Payment behavior
- Company structure
- Legal events
- Executives
- Finance
Components of a credit report
Many credit reports only include financial information about a company, which is generally fine. However, sometimes it's useful to look beyond what's immediately visible. For instance, consider a company that receives a relatively poor credit score because it's newly established. If this company is part of a larger corporate structure, you might make a different decision than if it were not. This kind of information isn't typically visible in a standard credit report, but corporate structures do indeed impact financial decisions.
There are also other factors you may want to know in advance. Consider legal events, for example. Lawsuits, ongoing bankruptcy proceedings, or the legal status of a company can significantly impact both the financial health of a business and potentially affect your own company. For instance, there's a risk of default if a company is involved in bankruptcy proceedings, or there could be reputational damage if you engage with a company that was recently involved in legal disputes or sanctions.
Determining a credit score in a credit report
Every day, we analyze large volumes of data. Through algorithms and extensive processes, we calculate our bankruptcy scores and Paydex. In a credit report, you'll find multiple scores. Let's go through them one by one.
Dun & Bradstreet Rating
Research shows that 75% of bankrupt companies had a D&B "Risk Indicator 4" one year before bankruptcy. The Risk Indicator alerts early to potential issues, allowing you to adjust terms to prevent losses.
Example of a D&B Rating in a credit report
Every day, public data such as court judgments and financial statements, along with unique D&B data, are added to the D&B database. This information is processed, and the D&B Rating is automatically updated. The D&B Rating consists of the 'Financial Strength' code (based on net worth) and the 'Risk Indicator' (1 = minimal risk, 4 = significant risk). Based on the D&B Rating, we provide a recommendation for the maximum allowable credit. The Risk Indicator, business activities, and size determine this dynamic indication, which is continuously updated.
More about the Dun & Bradstreet Rating
The Dun & Bradstreet Failure Score
The D&B Failure Score is a predictive indicator for corporate bankruptcies. It refines the D&B Rating risk scale from 1-4 to a scale of 1-100. The higher the score, the healthier the company and the lower the likelihood of bankruptcy within 12 months. The D&B BFailure Score reveals risks and is based on the largest possible amount of trade information.
More information about the Faillure Score
The Paydex®
More information about the Paydex®
Credit report and credit insurance
Taking out credit insurance can be very useful if you want to minimize risks. However, many credit insurers still require a credit report on a company before you can take out credit insurance. They conduct research into the creditworthiness of the company or companies you intend to do business with, as well as research into your own company. This allows them to assess the financial risks accurately and determine the premium you will need to pay.
Interesting read: Credit Risks: To take, avoid or insure?
Tips to improve creditworthiness
It may be that you are not satisfied with the credit score your company has, and you would like to improve it. Here are some tips that can help improve your creditworthiness:
- Improving payment behavior: It may seem obvious, but ensure that invoices are paid on time (preferably early). Anticipate incoming invoices and consider setting up automatic payments when necessary.
- Staying within credit limits: Take stock of all your existing credit lines and try not to spend more than 30% of these credit limits. This has a positive impact on your credit score.
- Debt management: Ensure there are as few outstanding debts as possible
- Consult an expert: A good accountant or financial advisor is trained to dive deep into the numbers and help you make the right financial decisions to improve your creditworthiness.
Requesting credit reports
If you're frequently looking for information about a company or a credit report, it can be time-consuming to buy individual credit reports and sift through them. There are several options available to automate this process.
In a platform
Mainly looking for financial information about companies? Then a platform is often the best solution. In D&B Finance Analytics, you get a comprehensive overview of the financial information about a company, both nationally and internationally. You can also monitor these data so that you don't need to purchase a new report every time new financial statements are filed.
In an integration
If you prefer to have financial data or other information about companies directly integrated into your own CRM or ERP system, then integration is the best solution. With Direct+ Data Blocks, you can choose which data blocks you'd like to integrate into your system. This could include the D&B credit score, recommended credit limit, authorized signatories, and much more. You have the flexibility to fully customize this package according to your needs, including selecting specific levels of data depth.
