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Anatomy of a Credit Report: Understanding the Role of Credit Information in Risk Assessment

What you’ll learn

  • What are b2b credit reports, and why are they essential for your credit teams?
  • How to pull the credit reports to review customers?

What is a Credit Report?

A B2B credit report provides a snapshot of your customer’s credit history. This means it outlines your customer’s payment history, business acquisition history, previous business records with other suppliers, credit scores, ratings, and much more.

Primarily, credit reports are external, and they are generated by popular credit bureaus such as D&B, Experian, and Equifax. Bureaus create credit reports for every customer in the world.

Why Should Businesses Monitor Their Customer’s Credit Information?

Credit history is essential because it helps the credit team make an informed decision about- whether or not to do business with a customer.

While onboarding a new customer, credit teams extract credit reports from various credit agencies and bureaus to ensure they get hold of credit information that’s up-to-date and accurate. From a customer’s credit history and payment behavior, the credit department decides whether the customer is creditworthy or not.

Alternatively, what about existing customer portfolios? Should credit teams pull credit reports for existing customers as well? The answer is yes. As credit teams are the watchdog of your organization’s bottom line their work never stops. Your credit teams have to constantly assess the risk of the existing portfolios to eliminate any possibility of delinquency. They can simply access the credit reports generated by D&B, Experian, and Equifax to review the customers’ credit history.

What are the Various Components of a Credit Report?

Every credit bureau or agency produces a different report with credit information. Let’s look at the credit reports of the leading credit bureaus to get an overall picture of what the elements present in a credit report are:

D&B’s Credit Report:

D&Bs business credit reports comprise of various credit scores and ratings, which include predictive to performance-based insights. Here are a few components of a D&B credit report:

  • PAYDEX Score – This score ranges from 1 to 100. It examines how fast your customer can make a payment after the order fulfillment.
  • Viability Rating – This rating is predictive in nature. It forecasts whether a customer is going to go out of business or become inactive.
  • Failure Score – this score represents whether your customer might go bankrupt and fail to pay back.
  • Legal Information – This section outlines any possible lawsuits, bankruptcy filings for your customer.

Equifax’s Credit Report:

A credit report by Equifax usually has the following fields:

  • Business Identification and Information – This section covers the business address, security numbers, and other contact information.
  • Credit History – This includes previous credit limits, credit history, and payment history with other suppliers.
  • Bankruptcy Information – Equifax provides detailed information about previous bankruptcies the business incurred.

How to Pull Business Credit Reports?

For day-to-day credit operations, your credit teams need access to business credit reports. Usually, credit analysts manually log into a credit agency’s website to download the information. This sounds simple, but it is not scalable when there are 100+ customer portfolios to review. Large enterprises have a huge customer base across the world, and their credit teams struggle with manually extracting credit information for ‘n’ number of customers.

What if your credit teams could automatically pull credit reports? HighRadius Credit Cloud helps your credit teams automatically pull credit reports from 40+ global and local credit agencies and bureaus. These agencies include D&B, Experian, CreditSafe, CreditRiskMonitor, and Serasa. Your credit teams can also access public financials from Yahoo, Edgar, Bloomberg, and credit insurance information from Coface, Euler Hermes, and Atradius. With automated credit information aggregation, your credit department can focus on evaluating at-risk customers while the credit scoring and approvals are automated.

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HighRadius Credit Software automates the credit management process, enabling credit managers to make highly-accurate credit decisions 2X faster and enable faster customer onboarding with 4 primary components: configurable online credit application, customizable credit scoring engines, credit agency data aggregation engine, and collaborative credit management workflow. Along with that, there are a lot of key features that should definitely be explored some of which are online credit application, credit information aggregation, automated credit scoring & risk assessment, credit management workflows, approval workflows, and automated bank & trade reference checks. The result is faster customer onboarding, better internal collaboration, higher customer satisfaction, more targeted periodic reviews, and lower credit risk across the company’s customer portfolio.