The days of credit reporting being influenced only by negative events such as missed payments have long gone, and these changes can affect your private practice or service as a contractor. Here’s what you need to understand about Comprehensive Credit Reporting to make sure your credit score is as strong as possible.
The concept of Comprehensive Credit Reporting (CCR) has been around for a few years but like any significant change, it can take time to be fully understood.
Comprehensive credit reporting simply means that positive information can now be used alongside negative information to better understand a person or business’ credit report. Say you want to apply for finance for your podiatry practice or as a sole trader; lenders now not only look for negative data (such as a low credit score incurred by missed payments or bad debt) but they also look for positive data (such as faster payments, the dates you opened and closed credit accounts and so forth).
So, how does this work in practice?
Know your score
Given your credit score helps to determine:
Whether or not you will be approved for credit
If you are approved, what rates and conditions you will be subject to.
Logic follows that you may want to know what your credit score is in advance of applying for any credit to fund your business activities. You can do this by contacting a credit bureau to access your credit report. This is what lenders will refer to when you next ask them for credit, so it pays to have access to this document before they do.
Create an opportunity
This gives you a window of opportunity to contest any reporting that is inaccurate, to improve any bad debt and use this knowledge to ensure your credit history is being presented in the best possible light to future lenders.
The new way of reporting, being CCR, can work in your favour as you can ensure positive credit events appear on your credit report. It also arms you with knowledge on how to increase these positive events between now and when you apply for finance. Making repayments on time, limiting applications for unsecured credit, using reputable lenders and so forth – it all adds up to a positive credit report.
A positive credit report is one in which your credit score is as low as possible. The higher the score, the more risk you present to lenders. Positive credit-related activities can go a long way to reduce this score in your favour.
To access your free credit report, contact a range of credit reporting bureaus such as Equifax’s free credit report service here.