Script section containing code for Liveperson Chat Solution

Using D&B’s Recommended Credit Limits

D&B Internet Access For U.S. Contract Customers

What is the recommended credit limit?

D&B’s credit limit recommendation is intended to help you more easily manage your credit decisions. It provides two recommended dollar guidelines:

A conservative limit, which suggests a dollar benchmark if your policy is to extend less credit to minimize risk.

An aggressive limit, which suggests a dollar benchmark if your policy is to extend more credit with potentially more risk.

The dollar guideline amounts are based on a historical analysis of credit demand of customers in D&B’s U.S. payments database who have a similar profile to the business you are evaluating in respect to employee size and industry. 

The guidelines are intended as benchmarks. They do not address whether a particular business can pay that amount or whether a particular customer’s total credit limit has been achieved (based on their total trade experiences and outstanding balances.) They are intended to provide a useful starting point, not to replace your own analysis.

Each set of limits is accompanied by an assessment of the risk category a business falls into, or D&B’s assessment of how likely they are to continue to pay their obligations within terms and their likelihood of undergoing financial stress in the next 12 months. The risk category is created using D&B's risk modeling methodology and is based on the company's credit and financial stress scores. (See below for more details.)

How were the recommended limits created?

The credit limit recommendations are based on D&B's standard credit rules, which were developed using modeling methodology that evolved from years of custom credit limit analysis for customers across a wide range of industries.

To develop the recommended limits, D&B selected a subset of several million companies from D&B’s database of payment information. These include single locations and headquarters (no branches) and companies with actual payment experiences and enough information to generate a D&B credit score.

The universe was then segmented by industry group and then employee size to determine the spectrum of credit usage in a particular segment.

Finally, the risk of potential late payment and financial stress for these businesses was assessed.

Together, these three dimensions – industry, employee size and risk -- make up a matrix of recommended credit limits that is segmented first by industry, then employee size, then by D&B’s assessment of overall risk – high, moderately high, moderate, moderately low or low.

So, for example, if you are looking to grant credit to an automotive company with 20 employees that D&B assesses as moderate risk, recommended limits would be suggested based on the historical credit patterns of other companies that share that industry, size and risk profile.

What does the risk category mean, and how is it created?

Two pieces of information go into creating the risk category for the business you are evaluating:

D&B’s Commercial Credit Score was designed to predict the likelihood that a company may pay its bills in a severely delinquent manner (+90 days past terms) over the next 12 months. The credit score uses statistical probabilities to classify risk based on the full spectrum of D&B’s business information, including payment trends, company financials, industry position, company size and age and public filings.

D&B’s Financial Stress Score was designed to help you predict a business’s potential for failure. It is designed to predict the likelihood that a company will obtain legal relief from creditors or cease operations without paying all creditors in full over the next 12 months. The score uses the full range of D&B information, including financials, comparative financial rations, payment trends, public filings, demographic data and more.

These two scores are combined to create the risk category used for generating the credit limit recommendations:

High Risk: These businesses have a high projected rate of delinquency (from the credit score) OR a high failure risk (from the stress score).

Moderate Risk: These businesses have a moderate projected risk of delinquency (from the credit score) and a moderate to low risk of failure (from the stress score).

Low Risk: These businesses have a low projected risk of delinquency (from the credit score) and a moderate to low risk of failure (from the stress score).

Businesses whose credit scores fall between moderate and high appear as "Moderately High." It is our recommendation that you assess these accounts further by examining other information in the report.

Businesses whose credit scores fall between moderate and low appear as "Moderately Low."

Businesses with Financial Stress (failure) scores assessed as high risk automatically receive a High Risk assessment, even if their projected delinquency rate is low or moderate.

Any business that receives a risk category assessment of High does not receive a credit limit recommendation. See below for more details.

For your convenience, the risk category that went into generating the recommended limit is included along with the dollar amount recommendations. The actual numerical scores are not provided with the Credit Limit Recommendation, but are available in selected D&B reports, including the Comprehensive Report.

If you need a more detailed explanation of the scores or risk levels, please call D&B’s Customer Resource Center at 800-234-3867 or contact your D&B account manager.

What situations do the recommended limits work best in?

The recommended limits, while not customized to every situation, create useful default starting points that help you assess how much credit to start with. They are intended as benchmarks for businesses in this industry and of this size.

Generally speaking, D&B’s limit recommendations are less applicable for very large credit lines - over one million dollars - and when assessing very large organizations, which may pay slowly as a rule. You are most likely to find the recommended limits useful for small to medium-large size decisions.

The recommended limits also are useful when you are dealing with a new customer or prospect, one with whom you do not have a previously established credit record

Are the recommended limits customizable?

D&B does offer a number of tools that create limits customized to your specific credit policies and customer base. This customization is not currently part of the recommended limits offered through the Business Information Report and the Comprehensive Report. For more information on customized limits, please contact your D&B account manager.

What does it mean if no recommendation is returned?

No dollar limit recommendation is returned in these situations:

  • If the business has a risk assessment of high
  • If the company you are evaluating is in bankruptcy

We recommend you investigate these accounts further by examining the other information in its report, such as the business's payment patterns.

In some cases, a recommendation cannot be created. These include:

  • D&B did not have enough information to create a benchmark, such as no industry classification.
  • The company is out of business.

How much does the recommended limit cost?

The limit recommendation is included with the price of the Business Information Report and the Comprehensive Report.

If you have feedback on this feature, please share your thoughts by sending an email to birfeedback@dnb.com.