Corporate Credit Profile: Your Report Card to the Business World

Is your business making the grade?

Whether you are starting a business or consumed with the day to day operations of your enterprise, your corporate credit profile should be of prime importance. After all, in a very real sense, your corporate credit profile is your company's financial report. Your window to the world--at least to the business segment of it--is your corporate credit profile.

What is a Corporate Credit Profile?

If you have ever applied for a job you know that your resume spoke loads about you, your values, your attitude, the quality of your work, and much more.

This is why you always wanted to "put your best foot forward" when presenting yourself in your resume. It gave prospective employers a picture of who you are and what you are about.

Your corporate credit profile, in essence, is the face that you present to other businesses when they decide whether to do business with you. And if they decide to work with you, on what terms. For this reason, you will want to make sure that your profile is as accurate, complete, and up to date as possible. Only you can serve as the most authoritative source for your business.

Your business might be highly profitable and thriving, but this might not be the authoritative view that other businesses have of yours. What matters most to them is the credit report they receive on you. It is from that that they will receive what they consider to be the complete and unvarnished truth about you and your business. This includes, most importantly, the risk of doing business with you.

Where Does This Information Come From?

The information contained in a corporate credit profile is gathered from a variety of sources, both primary and secondary. These include:

  • Company suppliers
  • Banks
  • Legal sources to include liens, suits, judgments, bankruptcy filings
  • Financial reports
  • Loans, grants, and contracts
  • News and media reports
  • Direct investigations and interviews

It is also important to note that in the case of Dun and Bradstreet your report is put through a series of quality checks, both automated and manual, to ensure the quality of the data. This is done to ensure that each report is as complete and comprehensive as possible. These methods also work to ensure that the final reports that are issues are as objective as possible. Furthermore, these ratings are compiled to create several summaries:

  1. Dun and Bradstreet rating. This is an overall evaluation of your business's viability and creditworthiness
  2. PAYDEX Score
  3. Credit limit recommendation. This summary is Dun and Bradstreet's recommendation for the credit limit that should be extended to your business.
  4. Financial stress score. This is a statistical tool that Dun and Bradstreet gives to the probability that your business will experience some type of financial stress within the next 12 months.

It is important to remember that despite all of the modeling and statistical summaries that your financial health might undergo in these reports, the most important factor to be held above all others is your payment history or that track record of how promptly you pay your bills and whether or not they are paid within the agreed upon terms.

This score will also reflect whether you do pay your bills outside of the agreed upon terms as well as how far outside of them you go. For example, if you agreed to a 30 payment term and instead you paid after 60 days, it will reflect better--although not well--than if you paid after 90 days, etc. All of this is a long way around saying that the better you are about paying your bills on time, the better your ratings will be, and as a result, the easier a time you will have of receiving credit and other benefits.

Be Proactive in Protecting Your Score

Many people believe that as far as their credit terms are concerned, the best they can do is to be reactive. Fortunately, this is far from the truth, which is a huge reason that it pays to be aware of your business credit score. After all, these scores might have the influence of computers, but people input the data, both from primary and secondary sources.

This even happens unintentionally sometimes.

The watchwords for credit are vigilance and accuracy.