October 18, 2022Uncategorized
Businesses everywhere face the difficult task of cutting expenses where they can and maximizing their financial efficiency every year.
Depending upon economic factors at any given time, it can be crucial for a company’s bottom line to not lose money by wasting time with deals and contracts that aren’t beneficial, especially in business-to-business transactions.
Being able to access credit information for prospective clients or other businesses that are seeking contracts can equip companies with the data they need to make informed decisions and set appropriate expectations for their contracts. That’s where Equifax Australia steps in to help.
What Is Equifax Australia?
There are three main credit reporting agencies in the world that gather and provide credit data for consumers and businesses alike: TransUnion, Experian, and Equifax.
Equifax operates in 25 countries around the world. While it has its main headquarters in Atlanta, Georgia, in the United States of America, it also has operations in South America, Europe, and the Asia Pacific region. This includes Australia.
The Australian branch of Equifax functions as a key resource for businesses in this region to assess risk, round out background check information and improve their overall strategies for growth over time.
In 2016, Equifax bought Veda, which was the top agency for credit data in both Australia and New Zealand.
As a result, Equifax Australia was formed with an outstanding database of credit information and analysis from day one and continues to collect, streamline, and organize helpful information for businesses and individuals in the Asia Pacific region.
Why Does Credit Matter?
Credit is essentially the legitimate capacity that an individual or business has to borrow goods, services, or financial resources with the promise of later payment.
Because credit reflects the overall reliability of any given entity to follow through on financial promises, a low credit score can serve as a red flag or warning to other entities before entering into a contract or agreement. A solid credit score, on the other hand, typically indicates that an individual or company will be a reliable partner in business.
Over time, the credit bureaus have collected a vast amount of data and developed a scoring system that is generally considered a consistent and reliable measuring tool for risk assessment.
The overall picture of any entity’s credit is complicated, and the work of Equifax Australia and other such credit reporting agencies is to take all of the relevant, complex data and synthesize it into one consistent scoring system that can be a resource to the public.
This takes a great deal of guesswork out of transactions such as mortgages, acquisitions, mergers, and other major purchases and exchanges.
Credit Score Factors
Many different factors are taken into account by Equifax Australia in determining the credit score of any individual or business.
One of the most significant factors is payment history. Even if a person has borrowed a significant amount of money, for example, if they have a clean history of making payments on their debt on time, their credit score will reflect that history positively.
In fact, it’s important for entities to have a payment history in the first place in order to establish credit and grow it over time. Payment history alone is responsible for about 35% of a credit score.
Another significant factor considered in credit scores is the amount of credit being used, which is sometimes termed a “credit utilization ratio.” This ratio can be determined by taking the total amount of credit being currently used and dividing it by the total amount of credit that is available to that individual.
This ratio can be very telling, and typically a higher ratio will result in a lower credit score overall because it indicates that there is a significant need for credit and therefore potentially a shortage of cash. In fact, this factor accounts for about a third of one’s credit score with Equifax Australia.
It’s advisable for any individual or business to keep their credit usage below 30% at any given time.
Other factors that are taken into account in a credit score are how much new credit has been opened more recently, how much diversity of credit methods there is in one’s credit history (for example, not just having credit cards), and even the length of the credit history.
Why Do Credit Checks Matter?
Because a credit score (and the specific factors that influence it) is a cross-industry standard measurement of an individual or business’s financial trustworthiness, businesses regularly need to perform credit checks to be certain that their risk is not too high before loaning services, goods, or money to another entity.
Credit-based transactions between businesses are a regular occurrence in many industries, and as a result, any given company’s credit scores with Equifax Australia and other major credit reporting agencies greatly affects whether it will be able to do business with other companies.
It’s also important that credit checks be refreshed from time to time, because the speed of modern business means that a lot can happen to affect a credit score even in just several months or years.
Credit checks can reveal whether an entity is potentially problematic, and they can also give good insight into what kinds of contract terms may work better or worse for that business.
By performing credit checks diligently, businesses can ensure that their cash flow will remain consistent, their relationships with other companies will be set up for success, and their valuable time and energy won’t be wasted in the process.
Access Equifax Australia and Other Resources With PencilPay
Utilising credit data as a risk assessment resource can be hugely beneficial for your business in determining the viability of contracts and writing out specific contract terms from case to case.
However, manually obtaining the right credit information from the major bureaus takes time and energy that could better be spent elsewhere.
Contact PencilPay today to find out how our robust contract management software can easily provide you with the Equifax Australia data you need along with simultaneously accessing many other relevant resources for accurate credit risk assessments.