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Credit Assessment Facts You Need To Know

A new financial year is upon us and with it comes some significant changes in the financial services sector.  Some of those changes impact the ability to obtain credit for both companies and individuals.

The actual credit score attributed by the credit reporting agencies to both the company and associated directors is a critical part of credit assessment today.

The range for a credit score is 0-1200. Below is a guide to the different categories.

  • Below average to average (0-509).It's more likely an adverse event will be recorded on your file in the next 12 months. You are in the bottom 20% of Equifax’s credit-active population. Many banks and financiers will decline an application based on this score.
  • Average (510-621). This score suggests that it's likely that you will incur an adverse event in the next 12 months. Your score places you in the bottom 21-40% of the credit-active population.
  • Good (622-725).Adverse events are less likely to be recorded for the next 12 months. You fall in the mid-range (41-60%) of Equifax's credit-active population.
  • Very good (726-832). Unfavourable events are unlikely to be recorded onto your credit file within the next 12 months. Your score places you in the second-highest percentile range of the credit-active population (61-80%)
  • Excellent (833-1200). Adverse events are highly unlikely to happen within the next 12 months when compared to the average Australian. The odds of no adverse events occurring on your credit file in the next 12 months are five times better than the population average and you are in the top percentile range (81-100%).

In the past these reports only provided data on predominately credit and utility accounts but that has changed. Now the credit reporting agency collects data on all company creditors including suppliers to your business. The data confirms whether your business is paying its creditors within the terms established.  For an SME business particular focus is being paid to how 30, 60 and 90 day accounts are conducted.  If there is a continual pattern of payment outside of the agreed terms they are recorded as late payment days and the credit score downgraded significantly.

The number of enquiries also impacts the credit score.  Numerous credit enquiries within a twelve month period will have a detrimental effect on the credit score.  Company Directors need to be aware that credit and trade enquiries related to their business that appear on the individual’s credit report will have a negative impact on the credit score.

In addition to this overdue ATO payments for your company will also be recorded on the credit file impacting the ability to obtain finance. On tax debts over $10,000 it is now essential that payment is managed appropriately and any arrangements made with the ATO are adhered to. If an arrangement is in place and payment is more than 90 days in arrears this will be noted on the company credit file.

SME Finance Group has already faced situations where a customer’s credit has been declined or additional conditions applied due to a sub 500 credit score. It is imperative that you understand the system and what your credit score is.  We are able to check your score or lodge an initial application for finance through the Access Seeker model which does not leave an enquiry on your credit report.  Your SME Finance Group representative can assist with this prior to any applications for credit.

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