expert advice: Phil Chaplin | CEO | CFI Finance Group
Know the Score Your credit score is just one of the pieces of information that lenders (and other creditors like trade suppliers or landlords) look at when considering whether to do business with you. For most people a credit score is a bit like their appendix, they’re pretty sure they’ve got one, but they’d struggle to tell you exactly what it is, and it’s never really a problem… right up to the point where it suddenly is. Your credit score can have a significant impact on your ability to obtain any sort of debt, and as a consequence a flow-on impact in your ability to start or grow your business. In this article I’m going to try to explain a little bit about how credit scores are calculated, why they matter, and how you can keep better control of yours. Firstly, what is a credit score? A credit score is simply a number on a scale, usually between 0 and somewhere around 1000 (depending on which company is doing the scoring). The score is just one part of a Credit Report which will also capture things like payment defaults, court actions, bankruptcies and 16 business franchise MAGAZINE
Phil Chaplin the Chief Executive Officer of the CFI Finance Group, a specialist finance company servicing Australia’s franchise, accommodation, and fitness sectors as well as small businesses more broadly. Phil has over 20 years’ experience in providing finance to businesses across Australia and New Zealand and has managed finance companies in the private and banking sectors, he is a former chair of the Equipment Finance division of AFIA.
more. Almost every lender or business that feels they’re taking credit risk on you or your business will use that score, along with other information, to decide whether you represent a good risk. Where do credit scores come from? The overarching term is Credit Reporting Agencies, or Credit Bureaus. In practical terms across Australia and New Zealand that usually means either Equifax (formerly VEDA), Illion (formerly Dun & Bradstreet), or Centrix. These companies collect information about businesses and individuals from a variety of sources, and then charge other authorised users a fee to access that information. It’s worth noting that as an
individual you generally have a right to access and correct information held about you (but they might not make it easy). How did you get a credit score? If you’ve ever obtained any sort of credit, you’ll almost certainly have a credit score with at least one of the Credit Reporting Agencies. This could have been anything from a pay-as-you go phone, to a car loan or mortgage. The very first time this happened your file will have been created with one of the agencies. Believe it or not this is actually a good thing, because having no credit file can be seen as being just as bad as (or sometimes even worse than) having a poor credit file, particularly if you’re out of your late teens. Once you have
