business credit report agencies

Types of Business Credit Reports & Their Importance in India

January 13, 2023 • 3023 views

Your business credit report plays an important role in understanding your company’s creditworthiness. Banks and NBFCs use a commercial credit information report to check whether a particular firm is eligible for a business loan or credit. It has all business-related information regarding past loans, current credit obligations, credit usage ratio, and the number of inquiries made. 

This blog will help you to get an understanding of the credit information report, sections of a commercial credit information report, types of business reports, business credit report agencies, the difference between CIBIL score and CIBIL rank, the importance of company credit reports, ways to improve company credit reports, etc. when you apply for a business loan in India.

What is a Commercial Credit Information Report?

A commercial credit information report or business credit report is a report of a commercial entity credit history that is prepared for potential commercial borrowers, such as public limited companies and private limited companies. It has a record of the company’s credit history, based on the data submitted by various lending institutions across India. It helps them in making better and quicker lending decisions by analyzing these types of business reports.

TransUnion CIBIL, Experian, CRIF High Mark and Equifax are business credit reporting agencies in India. These reports are used by different banks and NBFCs before offering credit to their customers looking for loans corresponding to their business.

For better understanding we are trying to explain the report prepare by CIBIL. For commercial entities such as public limited companies, private limited companies, partnership firms, and proprietorships there is CIBIL Rank and Company Credit Report (CCR). It helps to determine company’s creditworthiness.

When individuals apply for a loan, lenders pull a CIBIL credit report and it ranges from 300 to 900, where 900 is considered the maximum score. Just like individuals, businesses also apply for a business loan to finance the purchase of new machinery, acquire inventory, or expand the operation, etc., and when they do, lenders pull their commercial credit information report, which ranges from 1-10, where 1 is considered as the best rank.

Also Read: What Is a Letter Of Credit And How Does It Helps Business To Manage Finances?

What is Inside a Commercial Credit Information Report? 

Generally, a typical Commercial credit information report consists of below details about the business:

Report Order Details

  • It is present at the top of your report and contains Report Order Number, Member, Application Ref Num, etc.

Enquiry Information

  • This section has information about the company name, identification code, address of the company, etc.

Borrower Profile

It is divided into four different sections.

  • Borrower Details: It contains the borrower's name, Legal Constitution, Class of Activity, Business Category, Industry Type, etc.
  • Address and Contact Details: It contains the registered office address, phone number, etc.
  • Identification Details: It contains the company’s PAN details, company registration number, etc.
  • Delinquencies Reported on the Borrower: It contains the payment status of the company and the guarantors in the last 24 Months.

Rank

  • This section shows your credit rank name, credit rank, which typically ranges on a scale of 1 to 10, and ranking reasons. 

Credit Profile Summary

  • It shows credit facilities given by multiple institutions such as public sector banks, private banks & foreign banks, NBFCs & others, etc.

Enquiry Summary

  • It shows the number of inquiries made by lenders in recent months.

Derogatory Information 

  • It contains information regarding defaults, overdue and dishonored cheques due to insufficient funds, etc.

Outstanding Balances by Credit Facility Groups details

  • This section shows an overview of the company’s asset classification (Non-Funded, Working Capital, Term Loan, Forex, etc.) concerning the credit facilities available.

Location Details

  • It mentions additional addresses and contact information of the company such as location type, address, contact number, etc.

Relationship Details

  • It gives information about the related parties or entities associated with the business. It contains their name, type, relationship, percentage holding, address and contact details, PAN details, etc.

Credit Facility Details – As Borrower

  • This section displays details of the credit facilities availed by the business entity. It contains credit facility details, credit facility type, credit status, payment status, non-sufficient fund details, overdue details, etc.

Credit Facility Details – As Guarantor

  • It contains details about the credit facilities guaranteed by the business entity. 

Suit Filed Details

  • It contains details of suits filed (if any) by any of the previous lenders for the business entity.

Credit Rating Summary

  • It contains the latest three credit rating information assigned to the business entity by an external accredited rating agency.

Enquiry Details in the Last 24 Months

  • This section displays the details regarding the inquiries made by lenders for your company’s credit application. It provides information about credit lenders, inquiry dates, credit types, inquiry amounts, etc.

What is a Business Credit Report?

A Business Credit Report is a financial document which provides information about the company’s financial health. Containing information more than the history of payments, and creditworthiness of the business. It is very similar to a personal credit report but focuses on the company’s financial activities.

A business which is looking for short-term cash flow needs, or a long-term expansion plan can make use of credit reports by CRIF to make precise, quick judgements while making a clear decision about their creditworthiness.

The business credit report contains information about the business, credit history, credit score, trade reference, financial information, business background, and details about the organisation’s credit behaviour.

How do I Find Out My Business Credit Score?

As a business owner, it is essential to understand your company’s credit score. Businesses have their own credit score like an individual’s credit score, which provides the details about their financial health and creditworthiness.

You can check your business credit score with a few easy steps

  • Visit the official website of any credit rating agency like CIBIL.
  • Click on the “Commercial CIBIL Report”.
  • Fill out the details and register with your company.
  • Once you’ve registered, you will receive the credit report on your provided mail ID.

Once you get your credit report, there might be some changes that are required to be made to get a perfect credit rank. To get a good credit rank you must work on improving the factors that draw your business back, such as making late payments, having many credits, etc.

Importance of Business Credit Reports in India

  • When you apply for a new collateral-free business loan from any bank or non-banking financial company (NBFC), business credit reports play an important eligibility criteria for your loan application.
  • Based on your credit history lenders can judge your ability to repay the loan.
  • Your report can be used as a parameter in finalizing your loan amount and interest rate.
  • Current and old debts can be understood through the credit report.
  • It can help you in shaping your company's image, and a good business credit report can help you get a loan easily.

Also Read: 10 Key Points to Consider While Scaling Your Business in India

Ways to Improve Your Company Credit Report

  • Timely Payment of your old and new loans helps to maintain a good credit score. All the payments of EMIs and interest should be completed on time. As a borrower, you can maintain a good credit history by following a financial discipline by paying installments on time.
  • Companies should regularly check their company credit reports to verify the correct entry of figures by the lenders. When it comes to updating information there could be instances where the lender has mistakenly updated wrong information. Updating all details and information correctly is good practice for both you and the lender.
  • In general, it's a good idea to use credit responsibly, which means only borrowing what you can afford to pay back and paying off your balances in full each month if possible.
  • Every time you apply for credit, it results in a hard inquiry on your credit report, which can temporarily affect your credit score negatively. So, avoid applying for too much credit at once to reduce the number of hard inquiries on your credit report.

Maintaining a good credit history is not as hard as it seems. You can ensure that you are on the right financial track by following the right steps. By following the above-mentioned steps, you can demonstrate yourself as a responsible borrower and improve your credit score. Improving your credit score can take time and it is important to be patient and consistent in your efforts.

You can find many business credit reporting agencies online that offer various tools and products that can help companies to check, monitor, and seek to manage their scores and might give the company credit report in India free.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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