What is Credit Control?
Credit control is a financial strategy used by banks, financial institutions and businesses to control lending and ensure loans are given to customers with good credit scores and repayment history.
It helps to minimise the risk of loan default by identifying customers with poor creditworthiness and focusing on those who will pay back their debt.
Key Features of Credit Control:
- Only creditworthy customers receive loans.
- Reduces default risks and improves cash flow.
- Helps lenders stay liquid and stable.
Who Uses Credit Control?
- Banks & Financial Institutions – To reduce loan defaults and stay strong financially.
- Retailers & Manufacturers – To get paid by customers on time.
- Lenders & Creditors – To minimise financial loss and manage repayment risk.
A company’s risk management team monitors credit control to ensure profitability and stability.
Why is Credit Control Important?
- Prevents financial loss by lending to responsible borrowers.
- Ensures steady cash flow for lenders and businesses.
- Reduces bad debt, and protects institutions from liquidity crisis.
- Promotes financial discipline among borrowers.
- Boosts profitability by improving repayment.
Example of Credit Control in Action
Imagine a bank that lends without assessing creditworthiness. Many borrowers will not pay back their loans and the bank will be unstable.
With credit control measures, the bank lends only to customers with good credit scores and repayment history, reduces risk and gets sustainable cash flow.
