New Danish scorecard launching 30.09.2022
New Danish scorecard launching 30.09.2022
Informed decisions are based on qualitative data. As the world's most used provider of commercial credit reports and business information, our customers rely on us to continuously review and improve our risk forecasting methods. In 2022, Creditsafe launched new scoremodels for the Danish market.
Creditsafe's score is a predictive analysis tool to help you predict a company's risk. Our scoremodels are statistically assured and use a sophisticated system to predict the level of risk. It is based on a series of statistical scoring models that predict the probability of insolvency within 12 months. Each company is assigned a score as well as an individual risk forecast.
Creditsafe's credit score for calculating the risk level of companies is among the most accurate on the market. The score is updated daily and the models are continuously evaluated to follow economic changes and to provide as accurate an assessment as possible. Credit scores are included in all our credit reports.
The models are objective and are based on a compilation of business information obtained from Danish authorities and processed by our analysis team. Using our reliable scoremodels, the risk assessment can be done with the highest possible precision.
The new improved score is accompanied with an individual probability of Default (PoD). This shows the risk of doing business with a company in the form of percentage likeliness of insolvency. Commentaries will also be added to help explain the underlying reason for the PoD and score.
Creditsafe’s scorecard have an assessment scale of 1-100, divided into five risk bands, where each increased score implies a reduced risk. The scorecard’s high predictability means that companies with a low risk of insolvency are categorized with higher scores and in turn that companies with a high risk receive a lower score.
Each company is assigned a score, which is determined by an underlying risk forecast calculation. The output of this calculation is a percentage which we refer to as the Risk of Insolvency below. Each score from 1 to 100 corresponds to a range of “Risk of Insolvency” percentages as outlined in the below table.
In order to improve the understanding of how a company's score is calculated, we have added commentaries to the score. The commentaries highlight the most important things for the current score and provide an insight into how the company's predict risk has been calculated.
The colour indicate on whether it is positive, neutral or negative. The comments are made by Creditsafe and are significant for understanding how the risk associated with the business is determined.
Examples of commentaries:
Companies come in many different shapes and sizes. Understandably, these businesses will present a different set of characteristics when they are heading into difficulty and have a strong likelihood of failure. The segmentation aims to define a set of sub-populations that, when modelled individually and combined, rank risk more effectively than a single model on the overall population in each country.
The main base for segmentation of the Danish population is the size (in terms of the total assets level) and financial accounts. The assessment is then based on the factors that have been proven the most statistically indicative of failure within each segment.
For start-ups and smaller companies, directors and ownership information play an important role, while information from the annual accounts in larger companies is more important for the risk assessment.
Companies with financial accounts:
Our scorecard is complemented by a number of policy rules where we do not give a score between 1-100, but instead a comment. These rules apply, for example, when a company ceases or is exposed to high or difficult-to-assess risk or when we cannot assess the company with our generic scoring models. If the company does not have a score, an explanation is always given as to why the company cannot be risk assessed.
Examples of policy rules:
Gini is a statistical measure used to evaluate how powerful the Creditsafe scorecard is in predicting which companies will fail within the next 12 months. The Coefficient ranges from 0.00 to 1.
A 100% Gini is only in theory, but the closer to 100% the better. Gini for the danish model is 81%. The graph below shows the performance of the new scoring model and the red line at the beginning of the graph shows how we catch the bad companies on the lower part of the scoring scale. The grey comparison bar shows no separation between the good and the bad at each level.
The limit is Creditsafe’s recommendation of the total amount of credit that should be outstanding with a particular company. The following sections, show how the limit is calculated different for different business types. A recommended limit is used for all Danish companies based on a combination of company information, financial information and credit scores.
The financial information we use to calculate a limit is “receivables arising from sales”, “other receivables” and “cash and bank balances”.
Credit score 71-100: Credit limit is a maximum of 24% of the above
Credit score 51-70: Credit limit is no more than 18% of the above
Credit score 30-50: Credit limit is no more than 12% of the above
Good to know:
Bankruptcy
Forced liquidation
Reconstruction
54 %
Very Low Risk
37 %
Low Risk
9 %
High Risk
Our customer service helps you with everything you need, both by phone and via e-mail.