Credit files and scores: what lenders see when they check your company

Credit files are one of the most talked-about and least understood parts of business lending. Many owners assume a single score decides everything. In practice, lenders read the file for patterns and events, and the score is just a summary. Knowing what’s on yours, and how a lender is likely to interpret it, lets you go into an application with fewer surprises.

Two kinds of file

A company loan usually triggers two checks.

The company’s commercial credit file. This records the company’s credit enquiries, any defaults reported by suppliers or lenders, court actions and judgments, and insolvency events such as administration. It also links to public information such as company registration details and the directors on record.

The directors’ personal credit files. Because most small company loans come with personal guarantees, lenders also check each guarantor’s personal file. This shows personal loans, credit cards and home loans, repayment history information, defaults, court judgments and personal insolvency records.

The two files are separate, but lenders read them together. A clean company file with a director who has recent personal defaults will still raise questions, and the reverse is also true.

What lenders focus on

The score gives a quick read, but assessors tend to look past it to the specifics:

• Defaults. Unpaid debts reported by a credit provider or supplier. Paid defaults look better than unpaid ones, and older ones matter less than recent ones.
• Court judgments and writs. These suggest a creditor had to go to court to get paid, which lenders take seriously.
• Insolvency events. Bankruptcy, personal insolvency agreements, administration or liquidation of a related company.
• Repayment history. Late payments on consumer credit, which can appear on personal files.
• Enquiries. The number and timing of recent credit applications.

Why enquiries add up

Each time you formally apply for credit, the lender may record an enquiry on your file. A handful over several years is normal. Several in a few weeks can make it look as if the business has been knocked back repeatedly, even if it was really just shopping around.

That’s one reason we don’t run a credit check when you enquire. We can look at your situation, suggest the lenders most likely to fit, and only proceed to a formal application, with your agreement, when there’s a good chance of success.

How to check your own file

You’re entitled to request your personal credit report from each of Australia’s credit reporting bodies, and the OAIC explains how to do it at no cost. It’s worth checking before you apply, because errors do happen, such as a debt that isn’t yours or a default that was paid but not updated. If you find a mistake, you can ask the credit reporting body or the credit provider to correct it.

Commercial credit reports for companies are also available from the credit bureaus, usually for a fee. If you’ve had a dispute with a supplier, it can be worth checking that nothing has been listed without your knowledge.

A low score is not the end of the conversation

Plenty of business owners have something on their file. A tax debt that turned into a dispute, a supplier who listed a default during a disagreement, a director with a past business failure. Specialist lenders deal with these situations every day. What they want is context: what happened, when, whether it was resolved and why it won’t repeat.

Property security changes the picture further. Lenders who focus on the asset and the exit, including private lenders, can often look past credit issues that would stop a bank. Our page on bad credit business loans explains the options.

Small habits that protect your file

The simplest protection is keeping track of every account in the business’s name and every guarantee you’ve signed. Close credit cards and accounts you no longer use, pay small supplier bills on time even when bigger issues are in dispute, and respond quickly to any letter of demand. Many defaults are listed for modest amounts that were simply forgotten. A quick review every six months costs little and can save a painful surprise when you most need finance.

Tidying your file before you apply

If you have time before you need the money, a few steps can help. Pay or settle any outstanding defaults and ask for the listing to be updated as paid. Avoid new credit applications for a few months. Keep personal credit cards and loans up to date. And write a short, factual explanation of any past issues to share with the lender at the start.

Ask without touching your credit file

Tell us about your company, what’s on your file and what you need through our quick enquiry form. There’s no credit check to enquire, your details stay with one team, and a real person will tell you which lenders are realistic for your situation before any formal application is made. Ask about your options.