In this series, we are focusing on preventing debts by looking at how to spot a bad debtor. There are multiple ways to do this including looking at a client’s credit file.
Credit files.
You earn a credit score based on how effectively you manage credit that is extended to you. Lenders and creditors use this information to decide whether to do business with the subject. More info on this on moneysmart.gov.au.
This is not only for banks or lenders to use. You can also make informed decisions on who you wish to work with. For example, if you see a potential client with multiple unresolved payment defaults on file, it may suggest to give them a wide berth. There may be a company with multiple court judgements against them for overdue accounts. Would you wish to work with them?
Each client and situation is different, however, these types of situations beg the question, “Will this client pay?”. No matter how well you trust someone, you can benefit from knowing more about their credit score.
Credit reporting bodies.
In Australia, the three main credit reporting bodies are Equifax, Illion and Experian. As Experian explains,
“Each credit reporting bureau has their own methodology in the way in which their credit score is calculated, therefore your credit score may differ between each credit reporting body.“
The data is not shared between each bureau which makes it tricky to decide who to use. Although we mainly use Equifax, we also use a different bureau; CreditorWatch. Over the last few years, I have found CreditorWatch to be the easier and cheaper of the bureaus to get a credit score and information on multiple clients. See how being well informed can save your business time and money by checking out the 14-day free trial CreditorWatch offer.
If you don’t spot a bad debtor before the worst happens, we can assist when you lodge a debt with us or contact us on info@creditormate.com.au.
