Credit rating

Credit rating is part of a credit assessment and is often the final result of a credit rating.

A credit rating can be expressed in many ways: as a nominal value (1-10), letters (A, B, C) or even colors (Green, Yellow, Red).

In other words, a credit rating is often used as a summarized picture of a longer credit assessment, and there is often a very long and detailed credit assessment behind the credit rating. Although a credit rating may look simple when presented as a number, letter or color, it is the result of a comprehensive assessment.

Credit ratings can be given to both companies and private individuals.

Read also: Credit assessment of private customers
Read also: Credit rating for business customers

What is a credit rating?

In order for a credit rating to be made of your customers (private or business), a credit rating must be available.

A credit rating is an assessment of a company or private individual's financial situation, based on requirements and conditions that the creditor has often set and thus wants to clarify. This could, for example, be accounting information, ownership, debts, etc.

In other words, the credit rating is not tied to any fixed public requirements and frameworks, but only requirements and frameworks set by the company itself.

Credit rating vs. credit score

In everyday speech, credit rating and credit score are often confused, and for good reason.

In many ways, credit rating and credit assessment are also two sides of the same coin: an assessment of a customer. However, it's not entirely correct to confuse the two, as there is a difference between them.

The credit rating is a result of the credit assessment and thus a reflection of the credit assessment performed. A credit rating cannot be given to a private individual or a company without an underlying credit assessment.

Who uses credit ratings?

There are many companies, banks and lenders that make use of credit ratings, especially when there is a long-term credit/loan relationship between debtor and creditor.

The company acts based on the credit rating. If the credit rating is poor, the customer may be rejected or presented with different terms than customers with a better credit rating. These actions are up to the company itself to act on.

More and more companies are making use of customer credit ratings, for example with the help of Qatchr.

Why credit rating?

A credit rating is used to minimize losses to debtors/borrowers. Because the purpose of a credit rating is just that: to avoid or limit losses on debtors.

Credit ratings are by no means a guarantee that the company will not experience bad payers, but credit ratings definitely help to minimize them and thus be a management tool in the company's overall credit/loan policy.

Credit rating of your customers

Uanset om du har private kunder eller virksomheder som kunder, kan du med hjælp fra Qatchr foretage kredittjek og få en kreditrating på dine kunder.

Our platform makes it easy for you as a business owner, accountant or finance manager to gain financial insight into your customers and steer clear of those who may have a poor credit rating.

Read also: 5 tips to protect yourself against bad payers