Credit rating

A credit rating is the final result of a credit assessment and can be presented as a numerical value (1-10), letters (A, B, C) or colors (green, yellow, red). Although it looks simple, there is a comprehensive assessment behind a credit rating, which is often used to give an overall picture of a customer's creditworthiness.

Credit rating background

In order to establish a credit rating, a credit assessment must first be carried out. This assessment looks at various financial aspects of a company or private individual, such as accounting information, ownership and debt. The credit rating is not bound by government standards, but is customized to the needs and requirements of the individual creditor.

Credit rating vs. credit score

Although credit rating and credit score are often used synonymously, they are different. The credit assessment is an in-depth analysis of the customer's financial situation, while the credit rating is the final, summarized score that comes out of this analysis. You cannot obtain a credit rating without first going through a credit assessment.

Use of credit ratings

Many banks, lenders and businesses use credit ratings, especially for long-term credit or loan relationships. The credit rating often determines what terms the customer is offered. A low rating can lead to rejection or stricter credit terms.

What are the benefits?

The main purpose of a credit rating is to reduce the risk of losses on debtors. While it does not eliminate the risk of bad debtors completely, a good credit rating helps minimize this risk and serves as an effective management tool in the company's credit policy.

Read also: 10 tips to steer clear of bad payers

Implementation with Qatchr

Whether your customers are private individuals or businesses, with Qatchr's platform you can easily run credit checks and get a credit rating. Qatchr makes it easy for business owners, accountants and finance managers to gain insights into customers' finances and avoid those with bad credit.