About the Business Credit Scoring Model
This Business Credit Scoring Model is for evaluating the credit score, risk class and credit limit of New Customers with no public financial information. It is the best configured statistical model that can used by credit representatives. It incorporates data from credible sources such as D&B and NACM to evaluate a customer’s corporate credit risk and business credit limit.
How to Use the Credit Scoring Model?
Frequently Asked Questions About Business Credit Scoring
How is Business Credit Score calculated for New Customers?
- Aggregate Credit Data for the new customer from credit agencies and credit groups you trust (like D&B and NACM)
- Apply the credit data in your scoring model to get the respective credit score, risk class and credit limit.
Which sources should I trust for accurate credit information of any customer?
- Credit Bureaus like D&B, Experian
- Credit Groups like NACM
- Public Financials (P&A, Balance Sheet, etc.)
- Alternative sources like Personal guarantee
Which parameters/factors are a must in my credit scoring model?
- Failure Score (previously known as Financial Stress Score) (D&B),
- Delinquency Score (previously known as Commercial Credit Score) (D&B)
- Paydex (D&B)
- Average DBT (D&B)
- Predictive Scoring (NACM)
- Total Employees (D&B)
- Years in Business (D&B)
How to set credit limit based on risk categories?
This Credit scoring model is designed to set credit limits in two steps.
- The first step is to evaluate the entity level risk based on financial and operational business factors in order to complete the risk categorization. Simplified credit scoring model with various customizable parameters such as D&B, Experian and NACM have the ability to automatically assign credit limits, making sure the accounts with the highest risk are identified.
- The second step is to compare the calculated credit limit with the existing credit limit to predict the accuracy and make corresponding risk and sales decisions.
How frequently should you score your customers? What is the ideal period for credit reviews?
There is no ideal period for credit scoring. A good credit assessment model is one which is monitored continuously and updated periodically to ensure smooth business operations.
A Credit scoring model should be dynamic in nature. It has to track the payments automatically to enable periodic reviews. In this way, you will not have to wait for half-yearly or yearly reviews to reevaluate credit scores.
What is a good credit score for a new customer?
A credit score that uses different types of credit information to evaluate a customer’s risk is a better measurement than one single factor such as how that customer pays your firm.