Many people make the mistake of shrugging off a credit default, mainly because they don’t fully understand how such a record can affect their financial future. But credit defaults come with grave consequences and they should not be taken lightly.
What Is a Credit Default?
By definition, a commercial credit default is a debt of $100 of more that has remained unpaid for over 60 days.
Debt collection firms like Slater Byrne Recoveries have the ability to place credit defaults on businesses that do not pay their debts after the allotted 60-day period if the accounts in question are not disputed.
How Will a Credit Default Affect My Business?
Once a credit default has been noted on your company’s credit history, it will remain there for five years. It can’t be removed or stricken off, even if you eventually pay the debt off in full. In that case, the status of the default will only be updated to paid.
This permanence can negatively affect your company’s ability to acquire loans or other forms financing in the future. Potential lenders may see the credit default on your record as a sign that you are not a creditworthy borrower. Thus, hindering business growth and expansion.
Having a default on your record can also damage your relationship with your suppliers and distributors. They may be wary of doing business with a company that has a bad credit history and opt to charge you more or deny you entirely.
How Will I Know If I Have a Default?
Creditors are required to send at least two written notices of request for debt payment to your last known address. The first letter can be sent immediately after the invoice’s due date.
The second notice, which informs you that your debt can be reported to a credit reporting body if it remains unpaid, must be sent at least 30 days after the initial letter.
What Can I Do to Prevent Credit Defaults?
The best way to prevent all of this is to make sure you pay all your invoices on time. Also, maintain communication with your creditors. If you’re struggling to make repayments, inform your creditors immediately. This way, you can work together to come up with a payment plan that will work for your company’s current financial situation.
For more information on credit defaults, call us on 1300 794 290 or send us an email at [email protected].