This article intends to walk you through the steps required to interpret your Market IQ Financial data.
In this article:
- What is included in a company credit report?
- Company credit rating
- Company credit limit
- How often are the reports updated?
Company credit reports provide valuable insights to help you make quick and informed business decisions. They are especially useful when meeting third-party due diligence requirements and predicting supply chain risks.
In this article, we’ll explain what a company credit report typically looks like, how a credit rating is calculated and what areas you should review to decide on your business partner.
What is a company credit report?
Company credit reports give you instant access to the financial overview of a company, allowing you to verify existing or potential counterparties with confidence and ensure they are financially stable and trustworthy. It gives you peace of mind before entering any legally binding business agreements.
Why is it important to run credit checks on third-party business partners?
To stay in control of your business’s ecosystem, it is essential to fully understand the financial health of a third party. Always run a credit check on potential new vendors to avoid risky business relationships and monitor existing vendors’ likelihood of becoming insolvent before problems arise.
What is included in a company credit report?
- Company Summary
- Credit information
- Company History
- Financial information (e.g. mortgage details, profit and loss statements, and balance sheet)
- Director and shareholder details
- Group structure
- Adverse information (e.g. County Court Judgements in the UK)
Company credit rating
A company credit rating, also known as a business credit score, indicates the probability of a company becoming insolvent within the next 12 months. Every company is assigned a Local Score of between 1-100, with 0 being very likely and 100 being very unlikely. The higher the business score, the more stable the company is.
An A-E International Score is also available as not all countries use a 1-100 scoring system:
This makes it easier for you to compare the credit risk of companies from across different countries. A is the lowest risk, D is the highest risk and E is unrated.
Many reasons could lead to an E score, for example:
|Reason code||Rating description|
|1||Company is liquidated or is wound-up|
|2||Annual Accounts not available|
|4||Company's age is less than 18 months|
|5||Company not trading|
Please contact your Customer Success Manager for more information.
Company credit limit
The credit limit is a recommendation of the total amount of credit that should be outstanding at one time. It is estimated using the ‘Risk Weighting’ and key balance sheet figures for companies that file accounts or other non-financial information for companies that do not.
The maximum credit limit for companies is determined by these factors:
- For a Public Limited Company (PLC) scored 30 and above: $50m
- For a non-PLC company scored 30 and above: $1m
- For all companies scored below 30: $0
Where does the credit data come from?
The company credit rating is calculated using the most sophisticated statistical algorithms available. It takes into account over 150 parameters, as well as economic and industry factors. (Source)
The data is collected from over 200 sources, including official registries similar to Companies House in the UK. You can be confident that it is up-to-date and as accurate as possible.
How often are the reports updated?
The credit reports are updated in real-time, over 1 million daily times. Each version of your vendor’s credit report is stored within a Market IQ folder in the files area of the vendor record.