Lapasar
Finance & Payments

Credit Check

Also known as: Credit assessment

A credit check is an assessment of a company's financial standing and payment history to decide whether, and how much, credit to extend to it.

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Before offering credit terms, a supplier assesses the buyer's ability to pay — reviewing financial statements, credit reports, references and past payment behaviour. The result informs whether to grant credit at all, what credit limit to set, and what payment terms are appropriate.

Credit checks protect suppliers from bad debt and help buyers earn terms that match their strength. They are usually repeated periodically, since a company's financial position can change, and form part of the wider due diligence done during supplier and customer onboarding.

Frequently asked questions

What is a credit check?
A credit check is an assessment of a company's financial standing and payment history, used to decide whether to extend credit and what limit and terms to set.
Why do suppliers run credit checks?
To gauge the risk of non-payment before granting credit terms, helping them set an appropriate credit limit and avoid bad debt.

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