Director credit history can reveal company credit risk

3 March 2009
| By Liam Egan |

Researching a company director’s credit information significantly increases the likelihood of finding negative credit information linked to a company, according to business information company Veda Information.

Its research has identified a 23 per cent chance of finding negative information when company directors’ individual credit histories are searched in addition to the company’s credit file.

This compares to a 9 per cent chance of finding negative information solely by searching an Australian company’s credit file, according to Veda general manager Russell Evans.

If this is expanded to include a search of the company directors’ credit file, the likelihood of finding adverse information on the business almost doubles to 17 per cent, he said.

Evans said if that research is expanded to include a director’s involvement in other companies, the likelihood of finding adverse information rises to 23 per cent.

Evans recommends all businesses apply a simple background check on potential customers and suppliers involved in large financial transactions as a safeguard against risky business relationships.

He said since June 2008 there has been a 33 per cent increase in the number of director’s credit files containing “derogatory information”, including defaults, writs and judgements, court summons and bankruptcies.

Furthermore, the Veda research shows that directors with some type of adverse incident in their credit file are seven times more likely to default than directors with a clean credit history.

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