Giving credit to a customer is a big decision for a small business. By granting them credit you are, in effect, loaning them your money. Will they pay it back? Look at their credit history. It can help you predict how a customer will behave when it’s time to pay.
When a bank considers a consumer loan or a mortgage loan, it gets a credit rating from one of the three major credit bureaus. Then it decides whether to grant the loan and under what terms. Some of the terms that will be influenced by the credit rating are the amount of the down payment and interest rate, the length of loan, security and financial-reporting requirements. You should follow the same process when extending credit to individual customers.
For customers that are companies, there are different credit bureaus. The eight major sources of commercial credit information you can use are Cortera, Dun & Bradstreet, Equifax, Experian, infoUSA, LexisNexis Corporate Affiliations, MarketWatch and Yahoo! Finance.
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