Experian® Financial Stability Risk ScoreSM (FSR Score) Data Elements
The Experian® FSR Score covers U.S. Companies.
The Terms selected for listing here pertain to their display in the connection with Experian FSR data, and are shown roughly in the sequence of their appearance in the CRMZ website pages.
Many of these selected Financial Stability RiskSM (FSR) elements also appear in Experian reports.
The Experian® Financial Stability Risk ScoreSM is a predictive score that focuses on the small percentage of companies that are at a higher risk of a bankruptcy filing or of simply reneging on their obligations.
Of the businesses that cease operations each year, the U.S. Small Business Administration estimates that less than 10% are actually due to bankruptcies, so it can be inferred that the majority of small business failures do not involve bankruptcy courts or filings.
The FSR is a failure score and not just a bankruptcy score.
The FSR is not designed to predict "slow payment," but is instead focused on predicting the more serious "no payment" scenario typical of business failure.
Experian FSR Scores range from "1" to "100," with "1" the most-risky score and "100" being the least-risky score.
A code of "BK" signifies that Experian's database shows a bankruptcy for the subject company within 2 years (note that it is possible the company may have already emerged from bankruptcy, or conversely that it has already been liquidated, and still be listed with a "BK" code).
If a code of "NA" or a blank code is shown, this may mean that (a) Experian was unable to compute a score, (b) CRMZ's business name and address was not successfully matched to a company in the Experian database, and/or (c) Experian may not have the company on file.
FSR scores are approximately percentiles of the overall business population, so a score of "1" approximately reflects the most risky 1% of FSR-Scored U.S. companies.
Riskiness is more precisely described by the Bad Rate defined below.
FSR Scores are derived from Experian's proprietary statistical model, which uses more elements of the Experian database than can be displayed on the CRMZ service.
However, CRMZ shows key data elements and other information to support our clients' ability to evaluate and understand the FSR Score displayed for each company.
FSR Score Risk Class is a grouping of scores into five classes. (see table, below) The Low Risk class is Risk Class "1" (shown on the CRMZ website with a dark green color) which includes scores "66" through "100," covering 35% of scores. The smallest Risk Class is the High Risk group, representing scores "1" through "3."
These are shown on the CRMZ website with a red color. The next smallest class is scores "4" through "10," shown in dark yellow. These Risk Classes (and colors) simplify analysis, and help concentrate attention on a relatively small number of companies whose riskiness typically requires the most attention. Experian reports that excluding companies with scores "1" through "10" collectively has the effect of excluding 60% of the companies expected to have a "bad" outcome during the next 12 months, out of the whole population of scored companies. (see the score range table, below)
The Experian® Financial Stability Risk ScoreSM is reported on a 1 to 100 scale:
|66 - 100
|11 - 30
|4 - 10
|1 - 3
As defined for the FSR score, a predicted "bad" outcome includes either or both of the outcomes listed below, within the next 12 months:
- A new bankruptcy filing by the subject company,
- Two quarters in which 75% or more of the Total Due (see below) is 90+ past due.
Factors lowering the score (1 - 4)
These score factors, presented as bulleted text, summarize the four most influential factors in reducing the FSR Score from its maximum value of "100." Below is a list of the possible factors.
- Number of commercial collection accounts
- Risk associated with the business type
- Employee size of business
- Risk associated with the company's industry sector
- Number of commercial derogatory public records
- Number of commercial accounts continuously updated
- Recent commercial account delinquency
- Number of commercial accounts
- Number of active commercial accounts
- Balance of commercial accounts with delinquency
- Past commercial derogatory balance
- Balance to high credit ratio for other commercial accounts
- Balance to high credit ratio for commercial accounts
- Percent of total commercial balance moderately delinquent
- Percent of total commercial balance seriously delinquent
- Percent of commercial accounts delinquent
- Lack of active commercial trades
Trade Lines (aka Number of Combined Trade Lines)
The "Combined" trade lines include both "New Trade" which are those trade lines that have been added to Experian's file within the past three months, and "Continuous Trade" which are those trade lines that have had at least one update in the past three months.
Generally, more trade lines are associated with larger and more active companies, and the presence of more trade lines enables a better assessment of how well a company is paying its creditors.
Total Due (aka Combined Account Balance)
This total of balances includes "New" trade lines and "Continuous" trade lines.
"New" are those trade lines that have been added to Experian's file within the past three months, and "Continuous" are those trade lines that have had at least one update in the past three months.
The value is the sum of the most-recent total balances of each of these trade lines.
Experian does not show credit balances on a trade line, and may have adjusted the balances shown by netting any credit balances in 'later' past-due categories with debit balances in 'earlier' past-due categories.
Total Due is useful because it indicates the amount most recently owed, and is a measure of the amount of credit recently extended that is shown in Experian's file.
DBT (aka Combined DBT)
Experian calculates Days-Beyond-Terms (DBT) as a dollar-weighted average of the number of days beyond the invoice due date, at which a business has paid its bills to each creditor reporting.
If the field is blank, a DBT could not be calculated for the business.
This "DBT" calculation is based on both "New Trade" which are those trade lines that have been added to Experian's file within the past three months, and "Continuous Trade" which are those trade lines that have had at least one update in the past three months. As with "Total Due" above, the DBT calculation nets any credit balances that might show in a trade line with more recent debit balances; also, the calculation ignores any lines that show a net credit balance. DBT is a useful measure because it summarizes, in a single number, the actual payment behavior of a company in a specific period of time, as reflected by reported Trade lines.
High Credit (aka Recent High Credit)
This is the highest amount shown in any one trade line during the past 12 months as the net amount due, or reported in that line as its "high balance," whichever is greater. It is a useful indication of how much credit other creditors have been offering, among those creditors reporting.
Collections (aka Collection Count)
Accounts placed for collections by creditors of a business are sourced by Experian directly from collections agencies. It is a count of the number of accounts that have been placed with the agencies reporting, and is not a count of the creditors placing those accounts. Accounts placed are retained in the Experian file for six years and nine months from the time of the last update of each collection item.
This dollar value is the calculated median of the High Credit shown in all trade lines of the creditor business. It is an indication of the "typical" amount of credit that was actually offered to a business, by reporting creditors.
Liens (aka Lien Count)
This is a count of tax lien filings. Tax Liens are claims on any/all property of a business by government tax agencies: federal, state and local. All filing types are counted (including releases and modifications of the same initial tax lien), and will remain in the count for six years and nine months. The presence of tax liens is generally a negative signal.
The sum of the balances of the Tax Liens. (see Liens, above)
Recognizing that the amount currently owed for a tax lien has almost certainly changed since the filing date (up or down), the balances of any liens can be a rough indication of the size of these debts.
Large lien balances are generally a negative signal.
Judgments (aka Judgment Count)
Judgment filings are court decisions directing a business (as defendant) to make payments to a plaintiff. Because judgments are debts, often acquired in an adversarial proceeding, a large number of judgments can be an indication of trouble. All filing types are counted (including vacated judgments and releases), and retained for six years and nine months.
The sum of the balances of the Judgments. (see Judgments, above)
Recognizing that the amount currently owed for a judgment has almost certainly changed since the filing date (up or down), the balances of any judgments can be a rough indication of the size of these debts.
Total Legal Items (aka Number of Legal Items)
Experian collects "Legal Items" from public records and other sources. A large number of legal items can be an indication of trouble. They include:
- Business bankruptcy filings include Chapter 7, 11, and 13 new filings.
(see Bankruptcy Indicator, below)
Subsequent filings, such as discharges and "reopens," are also collected and counted. Each filing remains in the count for nine years and nine months from the filing date.
- Tax Liens are claims on any/all property of a business by government tax agencies: federal, state and local.
(see Liens, above)
All filing types collected are counted (including releases and modifications of the same initial tax lien), and will remain in the count for six years and nine months.
- Judgment filings are court decisions directing a business (as defendant) to make payments to a plaintiff.
(see Collections, above)
All filing types are counted (including vacated judgments and releases), and retained for six years and nine months.
- Accounts placed for collections by creditors of a business are sourced by Experian directly from creditors and from collections agencies.
(see Liens, above)
Accounts placed are retained in the Experian file for six years and nine months from the time of the last update of each collection item.
- UCC (Uniform Commercial Code) filings give notice to the public that a business has granted a secured interest in assets of a business, usually related to a loan or lease.
If key assets are already pledged, a business may have diminished financial flexibility with which to pay other creditors.
Total Legal Balance (aka Legal Balance)
The Tax Lien and Judgment "Legal Items" collected from public records (see Liens and Judgments, above), may show a dollar amount owed at the time of the filing. Bearing in mind that the amount currently owed has almost certainly changed (up or down) since the filing date, this Legal Balance may provide a rough indication of this aspect of a company's indebtedness from these legal reasons.
Bankruptcy Indicator (aka Bankruptcy Filed)
A "Yes" or "No" indicator of whether a company has been the subject of a bankruptcy filing. Business bankruptcy filings include Chapter 7, 11, and 13 new filings. Subsequent filings, such as discharges and "reopens," are also collected and counted. Each filing remains in the count for nine years and nine months from the filing date (which may be many years after a business has successfully emerged from bankruptcy). The presence of bankruptcy filings is generally a bad signal, but does not necessarily mean the company is currently bankrupt, or that it will become bankrupt in the future.
A "Yes" or "No" indicator.
"Yes" indicates that a dispute statement has been filed with Experian by the subject of the report, and further details of the dispute statement can be found in the Experian business profile report. A dispute indicator may stay in Experian's file for an indefinite period, until the submitter of the dispute requests it be removed.
Number of Employees
Experian obtains the number of employees from public records, information providers, and other sources. It may be "modeled" data or "reported" data, and is typically reviewed every 12-15 months.
Years in File
Number of years the business has been in the Experian commercial file.
Experian uses the 2013 version of Standard Industrial Classification (SIC) codes or the 2012 version of NAICS to categorize the general nature of a company's operations. Experian obtains this industry categorization from public records, information providers, and other sources. It is typically reviewed every 12-15 months.
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Tuesday, February 20, 2024