September 21, 2011

Three-quarters of SMEs fail to check customers’ credit ratings

by Jan Harris

Experian has uncovered a significant lack of awareness among small and medium sized businesses of the importance of checking credit scores.

Of the respondents to a survey of around 700 UK small businesses, nearly three-quarters (71 per cent) failed to check their customers’ credit status and 39 per cent didn’t even know what a credit score was.

While failing to check a customer’s score puts businesses at an increase risk of incurring bad debts, they could also lose out by failing to check their own score, as if there is a problem a customer or supplier may choose to move their business elsewhere.

They could also find it difficult to access finance if their credit score is low.

Experian also highlighted the need for business to file comprehensive and accurate financial information, as they could be given a low credit rating if they fail to do so, even though their finances are healthy.

In contrast the general public’s awareness of credit scores seems to be on the increase with credit reference agency Equifax reporting a 149 per cent increase in the number of people checking their credit files this year, compared with 2010.

Consumers can obtain a statutory credit report for £2 from Equifax, Experian or Callcredit.

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