Article
Written by Graydon
Posted on 30/07/2019

The science behind credit reporting

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As a forward-thinking, risk-aware business, it’s likely you use credit reports to gather information about your current and potential clients. Understanding their financial health, payment culture and growth potential can help you make informed decisions about whether to work together. Assessing your customers' creditworthiness will also determine the credit terms you extend. But have you ever wondered how your credit reports are made?

Transforming raw data into a credit report

You'd be surprised to know the number of sources used to compile a business credit report. Graydon draws on hundreds of information resources – from court records to corporate reports, media coverage and industry sources. Once this material is collated, it’s then compared and assessed to remove errors and draw conclusions. It is the depth of this research that ensures Graydon reports are a trusted resource to help businesses determine their credit relationships.

Storing information sources

As with all market data, the challenge for credit reporters lies in how to gain valuable insight from this information – and that’s as true for credit reporters at Graydon as it is for credit managers in companies of all sizes.

With so much data being used to assemble a credit report, the key is to keep this information organised and thoughtfully segmented, so that trends, patterns and insights can be extracted more easily.

Credit managers often need to supplement credit reports with their own data sources – whether that’s customers’ order and payment history or industry data. Implementing an insight-led data management process makes it far easier to do this effectively.

Verifying information sources

Information alone doesn’t always provide insight; it usually needs commentary to bring it to life. So if your data is carefully stored and organised, you can then move onto monitoring and analysis, as happens at Graydon.

To check the accuracy of data – as company health can change rapidly – Graydon compares its sources carefully. Analysis programmes automatically search for inconsistencies and anomalies within the data collated. Any elements that don’t correspond are then flagged for further investigation.

You may be surprised to learn that official sources frequently contain a number of errors. One of the best ways to remedy this is to compare as many sources as possible, so that data can be cleaned.

Granular detail

Graydon’s systems take analysis to the next level by using unexpected calculations to verify company information. For example, Graydon will calculate whether the number of employees within a company match the personnel costs, and then investigate any anomalies.

Official company publications are scoured for inaccuracies, ambiguities or omissions – for example if a director is named incorrectly, or core business areas change after print. Graydon uses information agencies to pursue these grey areas further, often contacting companies directly to ask questions. If errors are discovered, the company will usually publish a corrective statement.

Once all the information gathered on a specific company is verified, the analysis and evaluation phase kicks in to build a business credit report. Graydon’s assessments are then distilled into credit scores so that businesses have a clear frame of reference through which to understand their customers. As always, companies will gain the most knowledge when they supplement this with their own findings, such as insight from industry contacts.

The modern day credit manager plays a vital role in company success, so the more attention your business gives to credit management, the more accurate and fruitful the results.