Important Factors of Creditworthiness

Important Factors of Creditworthiness

Creditworthiness is customer ability to pay back the credit. Credit worthiness in simple term is credit rating of a customer for assigning credit limit. There are number of factor to be considered for determining creditworthiness of a customer.

1.    Reference

New customer may be asked to provide some reputable references about his credit ability and financial stability.

2.    Bank Statement

Bank statement is important document to judge the financial stability and creditworthiness of the customer. It is important that bank statement should be review carefully for reasonable period (at least last 6 month t0 1 year).

3.    Audit Accounts

Audit accounts & audit report can provide useful information about the customer worth. It is important that for new customer, these reports may not be available.

4.    Physical Visit

Even a brief visit to customer business location can reveal big things. Physical visit of sales staff to a new customer is highly recommended for judging its credit worthiness.

5.    Aging Analyses

Aging analyses of the existing customer is an effective tool to judge the customer record in debt payment. This information can be used for extending or reducing the credit limits of a customer.

6.    Market Rumors are Important

Market knows everything, and market rumors about the customer should not be ignored. These rumor should be give due consideration.

7.    Media can be Trusted

Media reports can provide useful information about the customer credit rating. For example a suspected fraud report about a customer requires immediate action by the sales department.

8.    Credit Rating Agency

Credit agency information about the customer is a reliable source. However, this credit rating is available only for very big customer.