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How Business Credit Agencies Work

Aug 17, 2007
Business Credit Agencies keep track of the performance of companies and their repayment records. The lending or credit financial institutions seek the help of reporting agencies in gauging a company's worth in terms of repayments and timely settlement of liabilities.

They do this to make sure that the loan or credit is not given to an enterprise that might not repay it or pose problems in paying back the due amount in time. These are mainly banks or other large financial institutions in the business of lending or investing in the business enterprises. These credit agencies have become a source of a substantial flow of information in both new and established markets.

Credit agencies cover large areas of record verification from personal credit reports to enterprise credit reports and ratings. These agencies provide accurate information about the companies and meticulously analyze data to help the hiring agency, such as lenders, to gauge the strength and patterns of the company from different angles. Some companies have designed unique tracking fields and each company is allotted a set of points, which as a whole, denote its strength. This point system makes it easier for the financial institutions to have a fair idea of what is to be expected. They take care to provide a brief about the personal credit reports of the decision makers of the companies so as to give an insight about the people at the helm of the company affairs, since the company, being a legal entity, reflects the character of the people who run it.

Method of Working:

Business credit agencies have their own network worldwide. These agencies keep a close track of the company's activities in different countries. They also consider and study regulations of the particular country closely to analyze the data accordingly.

These agencies use the help of vendors or another third party, which have a close relationship with a company and hence provide valuable information about the particular company. Then they verify the information gathered from different sources and thoroughly analyze it. They divide each segment into the industry focused agencies and volume focused agencies. There are agencies like client checker, which concentrate on small business units, and others, which only work for the IT related companies.

The working and the evaluation systems also vary. There are agencies, which rely mostly on the information provided by the business owners and there are other agencies, which go further and take into account the information provided by the vendors and the third parties. The roles of credit reporting agencies fit into the following categories.

1.Banking and lease payment performance information.

2.History of trade payments.

3.Recorded public data .

4.Personal credit data on the business principal.

5.A credit profile created by using information from vendors.

These reporting agencies take inputs from various segments such as banks and other institutions that have a lease paid by the company. Subsequently they also verify the credit reports of the owners of the company.
About the Author
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their
web site http://www.smallbusinessconsulting.com
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