Is your business at risk? Five red flags a company credit check will reveal

When it comes to managing your business, you need to ensure that your cash flow is always protected, whether you’re onboarding a new client, selecting a critical supplier, or entering into a new joint venture. In financial terms, this is referred to as credit risk, and this is where company credit checks come into play. 

It is true that many businesses may seem successful on the surface, boasting high-profile projects, when in actual fact, this couldn’t be further from the truth. The only way to see past the rose-tinted glasses is to implement said company credit checks. 

Company credit checks and 5 red flags they expose

At Creditserve, we help you look at what is really going on with businesses, and so, we decided to inform you on five red flags a well-implemented company credit check will reveal. 

1. The "hidden" county court judgments (CCJ)

A county court judgment (CCJ) is a legal order against a company that has not been able to meet its obligations in paying back its debt. While a small, and satisfied CCJ can at times be a clerical error, it becomes a different ball game if there is a pattern of them. 

A CCJ will reveal the frequency, dates, and amount of money attached to it, going into detail on what the company owes. So, if there are multiple CCJs attached to one company, it suggests that they cannot make good on their debt, decreasing the likelihood of paying you back, too. 

2. Rapid director turnover

The second red flag to watch out for is if there is no consistency in leadership. If the company credit file shows that there is a lack of consistency in leadership, you can expect that there will be no consistency internally either. It can also mean that directors are ‘jumping ship’, for lack of a better term, because they can foresee insolvency. 

Phoenixing is another tactic used by some directors, where they move from one failing entity to another so that they evade liabilities. 

3. High credit utilisation

A company credit report will analyse and reveal how much of the business’s recommended credit limit is being utilised across the market, much like a personal credit card.  So, if the company is consistently operating on 95% of its credit capacity, it will not have any ‘rainy day’ money and will lack any shock absorbers. This can result in missed payments to you, for example, if they have a bad month. 

4. Late or opaque filings at Companies House

Under the Companies Act 2006, annual accounts need to be filed by businesses, and if they do not, a company credit report will uncover this and show that the business is marked as ‘accounts overdue’. Late filings are very rarely seen as administrative oversights and are often interpreted as a deliberate attempt to delay having to publicly disclose a negative financial year. 

Naturally, there are stricter penalties and enforcement laws in 2025, which means that a company missing its filing date is seen as a company in financial distress. 

5. Negative net worth 

A business that has a negative net worth is declared ‘technically insolvent’, which happens when the company's total assets are exceeded by its total liabilities. This means that, should they shut down, they wouldn’t have any money to pay lenders back.  

So, a company credit report will take an instant look at the balance sheet and will reveal whether or not the net worth of the company is negative. These companies are called Zombie Companies and are merely kept alive by low-interest debt or by using new customer deposits to pay off old debts. 

The difference between a profitable year and a loss for a business will most likely come down to who you choose to partner with and conduct business with. This is why it is always so crucial to read a company’s credit file and to understand it before signing those dotted lines. You can count on the fact that any financial risks will always be documented. 

Creditserve provides you with real-time data,  along with our expert interpretation of this data, that will help you make informed decisions before going into business with a company. This way, you’re able to prevent the financial risks that come with this. From instant UK credit checks to deep-dive international reports, we ensure that when you say yes to a new partner, you're doing so with your eyes wide open.

So, if you’re ready to protect your cash flow, make sure that you get in touch with Creditserve on 01992 414222 to get started on running a company credit report.