All 22 Credit Control questions
More in Credit Control
What is a credit application and why is it used? What is the difference between credit control and collections? What are common credit terms and what do they mean? What is the purpose of a credit check before accepting a new customer? What is a credit hold and when is it applied? How do credit terms influence sales and cash flow? What is the order-to-cash cycle and where does credit control fit? How is credit exposure monitored on an ongoing basis? How should credit limits be reviewed and adjusted over time? How does a credit policy document support consistent decisions?
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Accounts Payable & Receivable › Credit Control

How do you assess a customer's creditworthiness?

Intermediate

Answer

Assess creditworthiness using credit-bureau reports and scores, financial statements (liquidity, leverage, profitability), payment history/trade references, industry and country risk, and sometimes a credit-scoring model. The output informs whether to grant credit, the limit, and the terms. Higher risk means lower limits, shorter terms, or security/prepayment.
Real-world example A leveraged applicant with slow trade references is offered a modest limit and shorter terms rather than a decline.

Common follow-ups: What financial ratios matter for credit? | What are trade references?

Collections & Bad Debts Aging Analysis Credit Control
All 22 Credit Control questions