Obtaining Credit Information. Homework Help

Obtaining Credit Information.

The first step in credit analysis Is obtaining credit information on which to base the evaluation of a customer. The sources of information, broadly speaking, are. Internal and (ii) external.

Internal

Usually, firms require their customers to fill various forms and documents giving details about financial Operations. They are also required to furnish trade references with whom the firms can have contacts to judge the suitability of the customer for credit. This type of information is obtained from internal sources of credit information. Another internal source of credit information is derived fmm the records of the firms contemplating an extension of credit. It is likely that a customer/applicant may have enjoyed credit facility in the past. In that case, the firm would have information on the behaviour of the applicant(s) in terms of the historical payment pattern. This type of infonnation may not be adequate and may, therefore; have to be supplemented by information from other sources.

External

The availability of information from external sources to assess the credit-worthiness of customers depends UP.110 the development of institutional facilities and industry practices. In India, the external sources of credit information are not a developed as in the industrially advanced countries of the world. Depending upon the availabilitv. the following external sources may be employed to collect information.

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