In my very first post to this blog, I advanced the notion of “the credit risk trifecta” and how there are three general factors that contribute to a business credit score. Well, I thought I’d follow that up with a sample of real data from Experian’s BizSource database.*
The following tables represent the mean values for three important (at a relatively high level) variables found to be more predictive of credit risk. For fun, I also thought it would be a good illustration to rank the top five highest scoring states (using the Intelliscore Plus model) and the lowest scoring states.
Keeping in mind that a higher Intelliscore Plus scores represents lower risk of delinquency, Table 1 are those states that rank in the Top 5 (lower risk). Notice all five have relatively low Days Beyond Terms compared to the national average of 7 and almost 2X lower, on average, than the Bottom-5 in Table 2!
The Top-5 are also applying for credit less frequently (Alaska being the exception) compared the national average of 0.12, and their account balances are about $1,000 less, on average, than the national average of $5,500. All of which tends to raise the credit scores over the national average of 59.
On the other hand, looking at the Bottom-5, we see a horse-of-a-different color. Table 2 shows those states that rank in the Bottom 5 (higher risk). Notice all five have relatively high days beyond terms compared to the national average of 7 and almost 2X higher, on average, than the Top-5 in Table 1!
The Bottom 5 are also applying for credit about as frequently as the national average of 0.12, and their account balances are over $1,000 higher, on average, than the national average of $5,500. All of which tend to lower the credit scores below the national average of 59.
*All data as of June 6th, 2011