Business Credit Scores and Ratings

Dun & Bradstreet’s Financial Stress Score, Percentile, and Class

What Is the Failure Score?

The D&B Failure Score (formerly the Financial Stress Score) predicts the likelihood that a business will, in the next 12 months, seek legal relief from its creditors or cease business operations without paying all its creditors in full. The Failure Score is derived from the information in the Dun & Bradstreet Data Cloud.

What Does the Failure Score Look Like?

The Failure Score is a multidimensional score comprising three components: a percentile of 1 to 100, a class of 1 to 5, and the score itself, which ranges from 1,001 to 1,875, with the lowest score representing the highest level of risk that a business will fail in the next 12 months.

Like the D&B® Delinquency Predictor Score, the risk information is classified in three ways, from the broadest (the class) to the most specific (the score.) The classifications are:

  1. A score between 1,001 and 1,875, where 1,001 represents businesses that have the highest probability of failure and 1,875 represents businesses with the lowest probability. This score provides a direct relationship between the score and the level of risk and enables the more granular cutoffs typically used in automated decisioning.
  2. A percentile between 1 and 100, where 1 represents businesses that have the highest probability of failure and 100 represents businesses with the lowest probability. The percentile shows where a company falls among businesses in the Dun & Bradstreet Data Cloud and is most effectively used to rank a portfolio from highest to lowest risk of business failure.
  3. A class between 1 and 5, which segments the scoreable universe into five distinct risk groups, with 1 representing businesses that have the lowest probability of failure and 5 representing businesses with the highest probability. The class helps you to quickly segment new and existing accounts into risk groupings to determine appropriate credit policies.

How Is the Failure Score Calculated?

Dun & Bradstreet aggregates company information from a variety of sources. These include public records, financial statements, and past payment experiences from vendors (also known as Trade References†). The Failure Score also weighs a company’s demographics against those of similar firms in the same industry. Some data elements used to calculate the score are:

  • Company Type – In general, businesses that are corporations are considered less risky. These businesses can typically secure additional financial support if necessary.
  • Age of Business How long a business has been operating is a measure of stability. The more years a firm has been operating, the lower the risk.
  • Lawsuits, Liens, Judgements The presence and number of open suits, liens, or judgements. (Dun & Bradstreet is the only credit data provider that has public lawsuit filings.) The absence of public filings is considered a positive factor.
  • Net Worth A negative net worth is an indication of higher failure risk, whereas a higher net worth is correlated with a reduction in failure risk.
  • Trade Data The model incorporates the percentage and dollar amount of satisfactory payment experiences in the Dun & Bradstreet Data Cloud. The higher the percentage of satisfactory trade experiences, the lower the risk. Also, the higher the total number of trade experiences, the lower the failure risk.

Why Does the Failure Score Matter?

The Failure Score is designed to help you predict a business’s potential for failure. It uses the full range of Dun & Bradstreet information, including financials, comparative financial rations, payment trends, public filings, demographic data, and more to provide more predictive insight. Using the Failure Score can help you drive growth and increase profitability by:

  • Automating decisions for increased efficiency
  • Processing large volumes of transactions more quickly
  • Moving valuable resources away from clear approve/decline decisions and focusing them on more complex credit decisions
  • Enabling more consistent decisions
  • Applying scores across an entire portfolio to quickly identify potential risk and opportunity
  • Helping to prioritize collections
  • Helping satisfy regulatory requirements for a timely, consistent, and objective decisioning process

What Does It Mean If Your Business’s Failure Score Has Increased or Decreased?

If you’ve been notified that your business’s Failure Score has increased or decreased, consult the infographic below for more detailed information on what this could mean.

How Can I Check My Business’s Failure Score?

By purchasing a Business Information Report on your company, you can view your scores and ratings. You can also monitor changes to your company’s credit scores and ratings* to better understand how your company is viewed in the marketplace. If you’re interested in another company’s business credit file, you can purchase its report or monitor changes to its file as well.

Who Else Might Check My Business’s Failure Score?

Suppliers, lenders, landlords, and customers are just a handful of business partners who could be interested in your company’s Failure Score. Businesses and financial institutions often consult Dun & Bradstreet’s credit scores in order to help manage risk. A poor Failure Score could make it difficult for your business to access capital or result in less generous loan terms. You could also potentially miss out on lucrative contracts due to concerns about your business’s ability to fulfill its financial obligations.

How Can I Impact My Business’s Failure Score?

You can take steps to ensure Dun & Bradstreet has up-to-date information about your firm, which can help impact your scores and ratings. You can also regularly check your business’s credit file so that potential errors and omissions can be spotted early on. (To learn more about updating your business information for free, visit Company Update.) Trade references can also help impact scores and ratings, and they can be sent to Dun & Bradstreet for approval via CreditBuilder Plus. Finally, CreditSignal®* is a free tool that will alert you to changes in your company’s scores and ratings, so you always know what’s going on with your file.

 

*CreditSignal only indicates that your D&B scores and ratings have changed and alerts you when your business credit file has been purchased. To view actual scores and ratings and learn about what industries are purchasing your D&B file, we recommend that you upgrade to one of our business credit monitoring or credit building solutions. Please note, due to the proprietary nature of these inquiries and inquiry requests, only the industries in which the purchasing customers reside will be revealed.

†Trade References will be added subject to D&B® verification and acceptance. Trade References are counted as fulfilled when a qualified reference is successfully added to your report. Please see the Trade References glossary page for eligibility, process and other information regarding Trade References.

 

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