Finance & Creditworthiness In Current Times

Posted on by Charlene Bennett

The modern day financial system evolving from an era of barter trade, initiating from the need for compensating a secondary party for services or goods purchased or exchanged has expanded its network and coverage globally from its origins, to levels of credit facilities taking prominence in our daily transactional processes. The general framework consisting of institutions, processes and legal agreements are in the main streams facilitating the economic process, enhancing trade and its compensation methodology enabling business on a larger scale.

Within the complete process, institutions have constantly dealt with issues of provision of financial services, repayments and default with individuals and business entities. In ensuring that suitable parties receive the benefits offered by financial institutions, an assessment system to ascertain creditworthiness is utilized. Credit rating Hong Kong is considered the most appropriate mode of controlling the decision making process in provision of financial services to businesses or governments whilst credit score is applicable to individuals.

The basic principle

Obtaining a loan or facility from any reputed financial institution is dependent on the capability of paying back the value with interest during a specified timeline. Having a high level on the rating system indicates better probability of a borrower paying back within the confines of the agreement which satisfies the lender to progress with issuing the facility whilst a lower rating indicates the opposite and is generally the cause for rejection in providing the services requested.

Significance of financial rating processes

With a majority of organisations, companies and groups depending on loans for start-ups, a bad rating could lead to a disastrous start with either rejection or the interest rate being increased from a standard level to higher level. Generally, a borrowing entity will strive to have the best possible rating prior to applying for any facility to avoid complications. Similarly, investors involved in purchasing bonds and stock, review ratings in detail prior to progressing with investments which has a significant impact on financial markets.

With a majority of the finance and business sectors completely reliant on the system designed to minimize risks in issuing of long term or short term credit, a certified credit report is considered a general document required along with standard documentation at most financial institutions. The report generally consists of details such as payment history, liability values, history of credit and timeline, types of credit facilities, and any new credit facilities availed etc to name a few.  

Diligently maintaining a high level on the system is considered a vital part for businesses as the ratings are constantly reviewed and changed with the most recent data being uploaded regularly. The impact of a single negative liability is capable of changing the outlook of any facility request or impact investments in a drastic manner whilst building up to higher levels can be a cumbersome and time consuming process. Therefore it is paramount that ratings are reviewed periodically and updated for the best possible image in the public domain. You can view more information about this here http://www.cbil.com.hk/en-us/backgroundCheck