Credit checking companies

Aren’t all these credit checks just based on the latest published accounts of the company and whether they’ve got any CCJs against them. Do any of them look at more up to date information, for example the actual payment history recorded by factoring companies?

Posted under Courier Financial Issues, Late Payment

Posted by Alec at 12:11 pm, July 11, 2007

7 Comments so far

  1. Alec added on  July 11th, 2007 at 12:29

    Isn’t that just for PLCs that have to report payment performance in their company accounts though? I’m talking from a position of ignorance here, I’ve not credit-checked anyone since 1999.

    As I mentioned in the ‘Ratings’ thread I’d be interested to know if any of these credit checks flagged the recently-departed ‘Network’ member as a ‘bad risk’.

  2. Alec added on  July 11th, 2007 at 13:19

    And the answer to my question Dean?

  3. Alec added on  July 11th, 2007 at 13:23

    Your email arrived just after I posted.
    So it doesn’t actually tell you anything other than the company wasn’t very profitable in its first year of trading? That was my point exactly – it’s just information that you could get from CH for £1 and it’s a year out of date.

  4. Alec added on  July 11th, 2007 at 14:42

    Well it’s useful enough to know whether a company’s got loads of CCJs against it I suppose; in this case they haven’t. The rest of the ‘credit rating’ seems to be entirely based on their first year accounts though. Even that limited information wouldn’t be available if they’d taken advantage of their entitlement to submit abbreviated accounts.

    I very much doubt that many of us on here would generate enough ‘payment history’ information for it to be picked up on a credit check. Who do you suppose contributes to building up our payment history? Possibly some factoring companies contribute to a database, I don’t know, I doubt that they all do though and with the efficiency of most factoring companies it would be a highly suspect source of information. Where else can this information possibly be sourced from?

    I suppose these credit check are fine as a quick access route to standard information from CH but as you’ve just shown all they seem to do is warn you off from trading with recently established limited companies – and I think most people could work that out for themselves if they actually considered the risks involved. We get no information whatsoever on the CURRENT financial situation and creditworthiness of the company.

    There’s no mention of someone (apparently) waiting almost a year to be paid, no way of knowing whether they’re overtrading, no way of knowing how long their debtors are taking to pay them, no way of knowing the financial status of their major customers and no way of knowing whether or not the company has spent the last three months teetering on the brink of bankruptcy.

    If we were inclined to give credit to recently established companies (and we’re not) then there’s nothing contained in the results of your credit check that would give us extra cause for concern: yet what’s happened has happened.

  5. Alec added on  July 11th, 2007 at 15:28

    But isn’t it the companies that are trading today and then bankrupt tomorrow that we want protecting from? If you’re not protected from that then what’s the point in carrying out the credit check?

    My whole point is that this type of checking is irrelevant when applied to a typical ‘Network’ member. We’re mainly (and there are obviously exceptions) too small, too new, don’t perform consistently, expand too quickly or basically just don’t show up on the radar of these credit checking companies. Most of the limited companies on here, including us, would be considered a bad credit risk by any sane person.

  6. Alec added on  July 11th, 2007 at 15:39

    I can’t find anything on that website that even suggests that payment experience is reflected in any way in the credit score, or even that they claim to monitor payment experience. I can’t imagine a mechanism where they COULD usefully and accurately monitor the payment performance of a small company. It could only possibly be done through information from factors and debt collection agencies and many small companies will only very rarely have dealings with either.

    It seems to me that the credit score is based entirely on CH information and CCJs etc. Even information from CH is close to useless when dealing with small, owner-managed, companies.

  7. Alec added on  July 11th, 2007 at 16:51

    They can only possibly show the assets and liabilities revealed by the out of date accounts held at Companies House.

    In the case of courier companies any assets on the accounts are almost invariably overstated anyway due to the vast difference between the book value of a 2 year old van and the actual value of the beaten up high mileage wreck in the yard.

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