The renewed Belgian scorecards

It is perfectly normal for Credit Reference Agencies to update and change their scorecards every now and again. As new information becomes available, we must seize the opportunity to utilise this data and improve predictability further.

We must also be vigilant in tracking marketplace trends and make sure that our predictive models are reflective of current developments. With constant changes to economic, social and political climates, some of the indicators that are predictive of failure today are likely to change in the years to come.

Creditsafe continually enhances our scorecards to reflect the current risk factors that have emerged within the local economies. Assessing the entire business population, we have refined and confirmed what indicators commonly hold for commercial stability, and what is predictive of a company heading into hardship

The Creditsafe scorecards are built to assess the entire business population of the country in question, utilising Creditsafe owned data as well as third party data.

Our assessment of this data produces a score which reflects the likelihood of business failure within the next 12 months. In addition, the Limit Solution is designed to offer a recommended maximum amount of credit to be extended to this business based on numerous financial factors. 

Our scorecards are built to compliment any business, however, we do also offer bespoke analytical services. Naturally, all businesses have unique business models, strategies and objectives. In order to help businesses gain greater clarity over their commercial landscape and opportunities, our world-leading analytical team have been commissioned to build a number of bespoke analytical models for companies in many countries.

For further details on our bespoke services please reach out to your dedicated account manager.

You will NOT need to make any changes to your Creditsafe account, app or API when the new scorecard is launched. All changes will be implemented automatically.

No, depending on the type of company, the size and the country, the algorithm is adjusted.

The probability of default (= PD; PoD) is a calculation that reflects the likelihood that a debtor will be unable to repay the credit or debt.

This probability or likelihood can be applied to a wide range of risk management and credit analysis scenarios. The Probability of Default depends not only on the characteristics of the debtor, but also on the economic environment. PDs can also be estimated based on historical data and statistical techniques. 

The PD is used in various risk management models to estimate the potential losses of lenders. In general, the higher the probability of default, the higher the interest rate the lender will charge the borrower.

Lenders usually want a higher interest rate to compensate for the higher default risk. Financial metrics - such as cash flow relative to debt, income or operating margin trends, and the use of financial leverage - are common considerations when evaluating risk. A company's ability to execute a business plan and a borrower's willingness to pay are also often included in the analysis.

At Creditsafe, this probability is calculated over a period of the next 12 months and is expressed as a percentage. The lower the percentage, the lower the risk. As such, the probability of default is reflected in the credit scores and ratings, and therefore as well in the updated credit score cards from Creditsafe.

Credit Score

The Creditsafe credit score calculates the probability of a company becoming insolvent in the next 12 months.

The company score is calculated using the most advanced statistical algorithms available. More than 150 parameters are taken into account, including economic and industrial factors, as well as historical data

Using a differentiation analysis, we have identified key data variables that are essential in predicting the probability of a company becoming insolvent within the next 12 months.  These variables are then compared to our entire company database and an appropriate risk weighting is assigned to each variable through statistical analysis.  By calculating these key variables, combined with the prevailing variables, we generate a credit score in every credit report for each individual company. 

Credit Limit:

The Creditsafe recommended credit limit is calculated using information from a company's payment record and from the payment records of similar companies. The company credit limit is our recommendation of the total maximum amount of credit that should be outstanding at any one time.

We calculate a company's credit limits by examining its financial position in more detail. By analysing critical credit information fields in combination with the company's credit score, we can more accurately determine a credit limit decision.

These fields include:

- Net worth
- Working capital
- Net cash flow operations
- Accounts receivable & liquidity
- Turnover (if available)

When a company has a positive score and the above financial fields are all of high value, you can usually expect this company to have a good credit limit.

If these values are low (or negative), then the credit limit decision will reflect this. The above financial items are standard for credit assessment conditions.