How to run a credit check on a new customer

Step 1 — recognise that terms are credit

When you let a customer pay in 30 days, you are lending them the value of the goods for a month. That is a credit decision, and it deserves the same care a lender applies. A single large bad debt can erase the profit on many good sales, so a few minutes of checking before you extend terms is time very well spent. See the true cost of a late payer.

Step 2 — check the public record

For a limited company, Companies House shows filing history, accounts and whether filings are overdue — late or missing accounts is a warning sign. A commercial credit reference agency gives a credit score, recommended limit, and any county court judgments. Look for CCJs, deteriorating accounts, and a pattern of late filings, all of which suggest a customer who may pay you late too.

Step 3 — gather your own signals

Ask new customers for trade references and, for larger accounts, a bank reference. Search for reviews or reports of the business paying suppliers late. Your own gut from early dealings counts too — a customer slow to return paperwork is often slow to pay. Combine the formal check with these softer signals for a fuller picture.

Step 4 — set a credit limit

Based on what you find, set a sensible credit limit for the customer — the maximum you will let them owe you at once — and start conservatively for a new account, raising it as they prove reliable. This caps your exposure so no single customer can hurt you badly. See how to set a credit limit.

Step 5 — protect the rest with finance

Even well-checked customers pay slowly sometimes; invoice finance can release cash tied in their invoices, and some forms carry bad-debt protection.

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.