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Credit wellness – why is it important?

Article provided by Experian

Credit wellness is important for a number of reasons:

  • Credit wellness impacts on a business’ ability to access funds that enable them to grow and thrive.
  • Credit providers view your credit wellness, and your credit wellness could impact their decision making.

One needs to understand what negatively and positively impacts one’s credit wellness. This is to avoid exposing your business to unnecessary risk. Regularly check your credit wellness to ensure that you have a healthy credit record.

Dispelling the myths

Myth 1: Credit bureaus can ‘blacklist’ you if you are a bad payer.
Fact: Being blacklisted is impossible. All they do is record your credit behaviour, good and bad.

Myth 2: Your credit record can only be accessed by credit providers.
Fact: You can access your own credit record at any time.

Myth 3: Credit bureaus are responsible for deciding whether to give you credit or not.
Fact: They only store information and give this information to people wanting to assess your report for credit.

Myth 4: You cannot challenge your credit report if you think it is wrong.
Fact: If you think information is inaccurate, you have every right to challenge it.

Myth 5: If you share your business’ financial information it could mean you pay more tax.
Fact: Financial information can be used as part of business credit score and could enhance it. Credit bureaus do not calculate tax.

Tips for managing your business’ credit reputation

First and foremost, be aware of what impacts on your business’ credit reputation.

  • Negative
    • Multiple applications for credit in a short period of time.
    • Late payment of invoices/credit.
  • Positive
    • Prompt payments to suppliers.
    • Sharing as much information as possible with the credit bureau.
    • Ensuing information provided to the credit bureau is accurate.

Monitor your personal credit reputation. Check your credit report on a regular basis. Do not expose yourself to risk – check the credit wellness of your customers and suppliers.

Tips for managing your personal credit reputation

  • Always answer questions honestly when applying for credit.
  • Budget for credit – never buy on credit unless you can afford the monthly instalments.
  • When applying for credit, ask the credit provider to explain the repayment terms (and interest rate) and understand exactly how much you have to pay back with each instalment.
  • Try to keep your debt repayments between 20% and 30% of your monthly expenses.
  • Pay your accounts every month by the due date.
  • Do not ignore any letters of demand – rather reply to them even if you cannot afford to pay.
  • Make alternative arrangements with credit providers if you cannot pay your debt in time.
  • Check your credit report on a regular basis (you are entitled to a free personal credit report once every 12 months, and any time after upon payment of a small fee).

Experian is a proud partner of the National Small Business Chamber (NSBC).

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