Company CIBIL score is crucial as it helps understand their creditworthiness and track as a borrower. This helps lenders check a company’s risk of default and helps them make an informed decision regarding sanctioning their credit.
On the other hand, it helps investors determine a company’s credit standing and help gauge their profitability and credit requirements.
Since the company CIBIL score is essential for a business’s financial health and also influences their prospect of availing a loan, it is crucial to track them.
Read along to find out how to access a company CIBIL score and more.
Company CIBIL score – In a nutshell
Essentially it is a 3-digit business credit score that helps evaluate a company’s financial track record and overall health. Typically, the score ranges from 300-900, and possessing a high score is deemed better in all cases. The score is assigned by a credit rating bureau like CIBIL based on an entity’s credit history provided by previous lenders and factors like:
- Timely loan payments
- Type of credit taken
- Active loans
- Length of credit history
Importance of a good CIBIL score for a company
Like an individual borrower’s CIBIL score, a good company CIBIL score helps it avail timely financial aid without many hassles.
A high credit score reflects a company’s creditworthiness and how well they manage its credit burden.
Though most factors of computing credit score for individuals and companies are the same, credit scoring system uses different information to build a company’s score.
How is a company credit score determined?
Business credit agencies such as TransUnion CIBIL, CRIF Highmark, Experian, and Equifax collect data from several to compile credit reports and credit scores for businesses. Such data are collected from entities such as:
- Business’s creditors
- Public Records
- Vendors
- Suppliers
- Court filing
- Collection agencies
Additionally, they weigh in on how the company managed its previous credit payments and how frequently it sought assistance. Other common factors include – the number of trade accounts, credit utilization ratio, outstanding balances, payment history, and more.
Notably, the credit score ranges vary among credit rating bureaus. For instance, these are the credit score range for businesses of different agencies:
- CRIF High Mark’s score ranges from 300-900. A 750+ score is deemed good and reflects a good payment record.
- The credit scoring system for TransUnion CIBIL is the CIBIL rank which ranges from 1-10. A score closer to 10 is more likely to get loan approvals.
- The business credit score for Equifax ranges from 112-992, and the highest score reflects the lower credit risk
- Experian business scores range from 1 to 100, and a higher score is preferable.
Today, financial institutions let businesses do a free CIBIL score check to help companies know their creditworthiness and credit standing.
Is it essential to check business credit scores?
It is crucial to check a company’s CIBIL score to know about one’s financial standing and if they are eligible for loan approval.
Besides that, the following reasons make it crucial to check the company’s CIBIL score:
To prevent fraud by identifying unknown accounts or unrecognizable credit applications. Typically, any inaccurate information or disputes can be a sign of fraud.
To monitor the business’s financial health by evaluating where the firm stands in terms of credits to gain a better picture of your creditworthiness and how likely you are to avail funding.
For safeguarding your personal assets. A lack of a good company CIBIL score could prompt lenders and financial institutions to ask for security as a guarantee against the loan. While it could help you avail loan despite a low CIBIL score, it also puts your assets at risk in case your default on payment. So, tracking your business CIBIL score works as a wake-up call to not only know one’s financial standing but also to make efforts to improve it.
How to build a company credit history?
One can build a company credit history by registering their business. Then they should proceed to open business bank accounts, utility services, and lease accounts.
Following this, companies must avail of a business credit card and a trade credit from suppliers. The next crucial part is to repay the credit card dues on time and pay the suppliers in full when promised. This timely payment will help build a healthy credit history.
Should you get your company credit report?
Essentially, a company credit report serves as a document featuring information on the behavior of a business. The document hosts information such as the number of loans availed by the company in the past, current credit obligations, credit utilization ratio, and even the number of financial inquiries made by NBFCs.
A company credit report is one of the many crucial documents lenders submit to analyze a business loan application. The data in the report enables them to assess a business’s current financial standing and creditworthiness.
Steps to check company CIBIL credit report
A business entity can follow these easy steps to check company CIBIL credit report:
Step 1: Go to the CIBIL website
Step 2: Navigate to the check CIBIL report application form
Step 3: Enter crucial details such as company name, address, business owner’s name, and address, company PAN, and contact details of the company
Step 4: Proceed to pay Rs. 3k to initiate registration. Following this, you will get a registration ID along with a transaction ID whose details will be shared over email.
Step 5: Share your KYC documents as per the requirement
Once these steps are completed, the company’s CIBIL rank and credit report will be shared soon. However, it might take up to 15 days to get a company CIBIL report.
However, companies can contact their financial institutions to find out if they offer free CIBIL score check and report access. This could simplify the process even more.
Regardless, it is advisable to check the company CIBIL report frequently to identify inconsistencies and fine-tune mistakes. Companies must inform authorities about the mistakes immediately, as such inconsistencies can hamper the company credit score.
