Credit referencing by agency

In the UK, there are several credit reference agencies that provide credit information and ratings for businesses. The main credit reference agencies in the UK for business credit are:

Experian Business (www.experian.co.uk/business): Experian is one of the leading credit reference agencies worldwide and offers a range of business credit reports, scores, and monitoring services. They provide comprehensive information on a business’s credit history, payment behavior, financial stability, and industry comparisons.
Equifax Business (www.equifax.co.uk/business): Equifax is another prominent credit reference agency that provides business credit reports and scores. Their services include credit risk assessment, monitoring, and credit data solutions for businesses of all sizes.
Dun & Bradstreet (www.dnb.co.uk): Dun & Bradstreet is a well-known provider of business credit information and ratings. They offer various products and services such as credit reports, scores, trade payment data, and analytics to help businesses assess creditworthiness and make informed credit decisions.
Creditsafe (www.creditsafe.com/uk): Creditsafe is a global credit reference agency with a presence in the UK. They offer comprehensive business credit reports, scores, and monitoring services, providing valuable insights into a company’s creditworthiness, financial stability, and risk assessment.

Experian

Experian assesses the creditworthiness of a business by analysing various factors and data points. Some of the key factors that Experian considers in rating businesses include:

Credit History: Experian reviews a business’s credit history, including payment patterns, outstanding debts, and the length of credit history. A longer and positive credit history tends to have a positive impact on a business’s rating.
Payment Performance: Experian evaluates a business’s payment performance on its financial obligations, such as loans, lines of credit, and trade accounts. Consistently making payments on time improves a business’s rating.
Public Records: Experian examines public records for bankruptcies, liens, judgments, and other legal filings that may impact a business’s financial health. These negative records can adversely affect a business’s rating.
Financial Statements: Experian may analyze a business’s financial statements, including balance sheets, income statements, and cash flow statements, to assess its financial stability and profitability. Positive financial indicators can improve a business’s rating.
Industry Comparisons: Experian may benchmark a business’s performance against other similar businesses within the same industry. This helps provide context for the business’s rating and allows for industry-specific considerations.
Business Size and Age: Experian may take into account the size and age of a business. Established and larger businesses generally have more extensive credit histories and may be viewed as more stable, potentially leading to higher ratings.

Based on these factors and their proprietary algorithms, Experian assigns a credit rating or score to a business. The rating typically falls within a numerical range or letter grade system, indicating the level of creditworthiness or risk associated with the business. The specific rating scale and criteria may vary depending on the region and the type of report or service offered by Experian.

The Experian business credit score rating scale is as follows;

100–76: Low risk of delinquent or defaulted payment
75–51: Low to medium risk of delinquent or defaulted payments
50–26: Medium risk of delinquent or defaulted payments
25–11: Medium to high risk of delinquent or defaulted payments
10–1: High risk of delinquent or defaulted payments

An Experian business score of 76 or higher is generally considered to be good.

Equifax

Equifax uses 3 factors:

The Business Payment Index
The Business Credit Risk Score
The Business Failure Score

Business Payment Index

The Equifax Business Payment Index (BPI) is a measure of how promptly businesses make their payments to suppliers and vendors. It provides insights into the payment behavior and performance of businesses. The BPI is based on data collected from trade credit transactions reported by various suppliers and vendors.

The Equifax BPI is typically represented as a numerical value on a scale, where a higher value indicates that businesses are making their payments on time or ahead of schedule. A lower value may suggest a delay or inconsistency in payment behavior.

The BPI can be used by credit providers, suppliers, and vendors as a reference to assess the creditworthiness and risk associated with a business. It helps them understand the payment patterns and financial discipline of a business when making credit decisions or setting terms for trade credit.

A Business Payment Score of 90 or higher is generally regarded as good, indicating that a company consistently pays its bills ahead of schedule or within the agreed-upon timeframe. On the other hand, a score falling between 89 and 80 suggests that the company has made at least one payment within the past 12 months that was delayed by 1 to 30 days beyond the specified terms.

Credit Risk Score

The Equifax Business Credit Risk Score takes into account various factors and data points to evaluate the creditworthiness of a business. These factors may include the business’s payment history, outstanding debts, public records, financial statements, industry comparisons, and other relevant information.

The score is typically represented as a numerical value or a range, where a higher score indicates a lower credit risk and a lower score suggests a higher credit risk. The specific scoring range and criteria may vary depending on the region and the version of the Equifax scoring model being used.

Lenders, suppliers, and other credit providers often use the Equifax Business Credit Risk Score as a tool to make credit decisions, determine credit terms, and assess the level of risk associated with extending credit to a particular business.

Businesses are ranked on a scale between 101 to 992, with a lower score correlating to a higher risk of delinquency. A good Business Credit Risk Score is around 700 or higher.

Business Failure Score

The Business Failure Score is a metric that assesses the likelihood of a company ceasing its operations within the upcoming 12 months. Equifax employs a range of data sources, including the business’s legal records, payment and credit information, and demographic data, to determine this score.

The score is measured on a scale ranging from 1,000 to 1,880, where a lower score indicates a higher risk of insolvency or business failure. Generally, a good Business Failure Score falls at or above 1,315.

Dun & Bradstreet

Dun & Bradstreet (D&B) is a renowned credit reference agency that utilises a diverse range of financial data, public filings, and industry information to generate three distinct business credit scores. These scores are the PAYDEX Credit Score, the Financial Stress Credit Score, and the Commercial Credit Score.

Each of these business credit scores assesses a specific risk aspect connected to a company. The PAYDEX Credit Score evaluates the payment performance of a business, indicating how promptly it settles its bills and financial obligations. The Financial Stress Credit Score gauges the likelihood of a company ceasing its operations within the following 12 months, providing insight into its financial stability. Lastly, the Commercial Credit Score assesses the probability of a business making late or delinquent payments on its bills and obligations.

PAYDEX Credit Score

The PAYDEX Credit Score is based on data collected from trade experiences reported to D&B by suppliers and vendors. It measures a business’s payment history over a specific period, typically ranging from 1 to 100, with higher scores indicating better payment performance.

A PAYDEX Credit Score of 80 or above is considered good and suggests that a business consistently pays its bills on time or ahead of schedule. Scores below 80 may indicate delays or inconsistencies in payment behavior.

The PAYDEX Credit Score rating scale is as follows;

Good Score: 100–80; Payments come up to 30 days early or on terms
Fair Score: 79–50; Payments come between 15 to 30 days beyond terms
Bad Score: 49–1; Payments come between 60 to over 120 days beyond terms

Lenders, suppliers, and other businesses often use the PAYDEX Credit Score as a reference when assessing the creditworthiness and payment reliability of a business. It helps them evaluate the risk associated with extending credit or entering into financial transactions with that particular business.

Financial Stress Credit Score

The D&B Financial Stress Score is designed to assess the financial health and stability of a business and predict the likelihood of it experiencing financial distress or ceasing operations within the next 12 months.

The Financial Stress Score takes into account various financial indicators, including but not limited to, financial statements, payment behavior, public filings, and other relevant data. It analyzes these factors to evaluate the overall financial risk associated with a business.

The score is typically represented on a scale ranging from 1 to 100, with higher scores indicating lower financial stress and a lower risk of potential business failure. Conversely, lower scores suggest a higher level of financial stress and an increased likelihood of encountering financial difficulties.

Delinquency is defined as paying bills 91 days or more past the terms. The score also predicts the chance of a company obtaining legal relief from its creditors or failing within the next 12 months without paying off any outstanding debts.

Commercial Credit Score

The D&B Commercial Credit Score takes into consideration various factors, including but not limited to, payment history, public filings, financial statements, industry data, and other relevant information. It analyzes these factors to generate a credit score that reflects the business’s creditworthiness and its ability to manage financial obligations.

The score is typically represented on a scale ranging from 1 to 100, with higher scores indicating lower credit risk and a higher likelihood of the business making payments on time. Lower scores suggest higher credit risk and a greater probability of late or delinquent payments.

Lenders, suppliers, and other businesses often use the D&B Commercial Credit Score as a reference when evaluating the creditworthiness of a company. It helps them assess the risk associated with extending credit or entering into financial transactions with that particular business.

Creditsafe

The Creditsafe Scoring Model assigns scores ranging from 1 to 100, with each score corresponding to a specific level of risk. The model’s high predictive power effectively categorises “bad” companies with low scores (indicating higher risk), while higher scores indicate more creditworthy businesses.

Creditsafe Ranking: Ranking companies based on their likelihood of financial difficulty enables more informed decision-making. In addition to having a score, the score can be compared to other businesses within the same industry or of similar size, providing valuable insights.

Creditsafe Scoring Bands: The Creditsafe Scoring Bands simplify the segmentation of the scoring model into five distinct segments. These segments are based on the connection between the likelihood of insolvency and real-world statistics, allowing for a meaningful classification of credit risk that is not dependent on population percentages but rather on the population percentages of failure.

Factors Considered in Scoring a Company: Creditsafe’s scoring model takes into account various factors, including industry, previous bankruptcy, number of employees, age of the company, legal filings, payment history, and credit risk scoring model. These factors, among others, are considered to determine a company’s score.

Credit Limit: The credit limit represents Creditsafe’s recommended total amount of outstanding credit for a company at any given time. It is estimated using risk weighting and key balance sheet figures for companies that file accounts, or other non-financial information for companies that do not.

Conclusion

There are four main credit referencing agencies in the UK for business. Experian and Equifax are the main ones.

It is useful to know which agencies operate, but it is more important to simply follow the principles of ensuring that you regularly check your credit file and that you make improvements by ensuring that you ensure all official data is complete and accurate, you have registered with the credit reference agency or business directory to improve your visibility, accounts are filed on time, invoices are paid on time and your company has the correct SIC code.