Credit Score - checkSURE's Credit Rating

Credit score - increasingly this is an important variable in assessing the credit worthiness of a potential customer or supplier. With more information available on just about everything, you might think that devising a credit score is becoming easier. Yet concerns for privacy and data protection ensure that that is not always the case. In commercial credit checking, credit scoring is still a relatively new phenomenon, and there are also some interesting questions that are still being debated. For example, should an individual's personal credit score have an impact on any business that they are managing? Probably, this is irrelevant to the credit score associated with a PLC, but how about to the credit score of a sole trader or partnership? In any case, in the UK, it is a moot point since data protection regulations prevent the companies that devise a credit score from factoring an individual's personal credit rating (even assuming that they know it) into the equation.

For its part, checkSURE does not devise or create its credit score -checkSCORE. We continually search for the best value and most predictive credit score in any of the markets where we source business and company reports.

The current checkSCORE has been developed by the UK data company, N2Check. N2's analysts based the risk score on the UK's most comprehensive econometric study of Corporate Failure undertaken by the Bank of England. The results were published in Working Paper 210. Published in 2003, this paper examined the determinants of failure among individual UK public and private companies, over the period from 1991 to 2001. Using information on profitability, interest cover, capital gearing, liquidity, company size, industry, whether a firm is a subsidiary and overall economic conditions, it concluded that it is possible to construct estimates of the probability of failure for individual companies.

A copy of the bank of England’s Working Paper 210 can be found here.

N2Check have taken the statistically significant characteristics of failure from the Bank's non-heteroscedastic probit model and added to them following a remodelling exercise. Based on external comparisons N2 believe that the Risk Score is the most predictive in the UK marketplace and has improved ability to predict corporate and non-limited business failure. If you have any questions or comments on how N2Check have derived checkSCORE please email in the first instance:

customer.services@N2Check.com

But please beware. No matter how good the checkSURE team think the methodology is behind checkSCORE, we do not advise that any of our customers use only this indicator as a condition for extending credit or assessing the credit worthiness of a prospect or customer. There is much more to deciding to do business with someone or something, than just a credit score. In practically all instances, the checkSCORE is derived from a statistical analysis of publicly available information. If a business is late or abstains from meeting its information obligations (particularly in the case of incorporated businesses), then this will usually (negatively) impact its credit score (if accounts are filed late with Companies House, for example). However, it is difficult, if not impossible, for a credit score to account for business owners who deliberately file or disseminate false or misleading information.

The key characteristics that contribute to the checkSCORE and credit limit calculations for Limited Companies are:

• Profitability
• Liquidity
• Debt serviceability
• Group structure
• Capital gearing
• Tangible Net Worth
• Working Capital
• Net Cash Flow from Operations
• Industry sector
• Age of company
• CCJs
• Company size
• Accounts irregularities
• Public information on winding up, insolvency or dissolution

The table below describes the checkSCORE for Limited Companies' Risk Bandings in more detail.

The key characteristics that contribute to the checkSCORE and credit limit calculations for Non-Limited businesses are:

• Age of business
• Size of business
• Business type
• CCJs
• Insolvency information

The table below describes the Non-Limited Business Risk Bandings in more detail.

Whilst bearing in mind the caveats referred to on this page, we believe that checkSCORE is Britain’s best value commercial credit score.