In our current economic environment, it is essential as a service provider to be aware of a client’s credit score prior to commencing work. This does not just apply to new to firm clients, but also to existing clients, particularly if they are working in economically challenged industries.
Knowing a client’s credit score and payment history is a valuable asset for any professional credit manager tasked with following up slow paying or delinquent debtors. The credit manager can also provide guidance to the advisors within the firm on how to mitigate risk of client payment defaults.
This is important for several reasons:
- A credit score can provide a snapshot of your client’s financial health. It will help you to understand their ability to manage debt and make timely payments.
- By knowing your client’s credit score, you can assess the risk of engaging in work with them.
- A low credit score can indicate a higher risk of payment default.
- Understanding your clients credit score allows you make informed decisions about how you interact with your client and determining payment terms.
- Discussing credit scores with your clients can improve your client relationship and open up conversations about their financial situation and provide opportunities for financial advice
- A credit check can help verify the identity of a new client, which can assist in reducing the risk of fraud and ensure you are dealing with a legitimate business.
What affects your credit score?
The most important thing to remember is that your credit score can alter as information on your credit report changes. if your credit behaviour improves then your score can change to reflect this. Your credit score can be affected by
- Your repayment history (not paying your bills on time)
- Applications you’ve made for credit (how many times have you applied for a loan)
- Unpaid debts or defaults
- Adverse information like court actions
How can I improve my credit score?
There are a number of ways you can help improve your credit score:
- Pay your business debts on time
- Pay your mortgage, personal loans, credit cards, phone and utility bills in full every month.
- Be smart when applying for credit – shopping around for credit, making lots of applications in a short amount of time can negatively impact your credit score.
The team at Fee Synergy are well educated on this topic. If you wish to discuss in further detail, please reach out to Dean Phillips on deanp@feesynergy.com.au
