Business Definition for: D&B's Financial Stress Score
What is the Financial Stress Score?
D&B's Financial Stress Score helps 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 ratios, payment trends, public filings, demographic data and more to determine the risk of doing business with your company.
How does D&B define Financial Stress?
D&B created its Financial Stress scoring system to predict the likelihood that a company will experience financial stress based on the definition that a financially stressed company is one that:
Note: Voluntary discontinuance involving no loss to creditors is not defined as financially stressed.
What is the Financial Stress Scoring System?
The Financial Stress Score System classifies risk information in three ways:
A Class: The best choice for an at-a-glance risk assessment. The Class system segments the businesses in the D&B database into five distinct risk groups. The class indicates that this firm shares some of the same business and financial characteristics of other companies with this classification. It does not mean the firm will necessarily experience severe delinquency in payment. Class Scale: 1 to 5: (1 = Lowest Risk, 5 = highest risk)
A Percentile: A granular view providing a more specific classification of risk. The percentile shows you where a company falls among businesses in the D&B information base, and is most effectively used to rank order a portfolio from highest to lowest risk of sever delinquency in payment. Percentile Scale: 1 to 100: (1 = Highest Risk, 100 = Lowest risk)
A Score: The most granular view providing a more specific classification of risk. The score provides a direct relationship between the score and the level of risk and enables more granular cutoffs typically used in a more automated decision-making process. Score Scale: 101 to 607: (101 = Highest Risk, 607 = Lowest risk)
|Risk Class||Score Range||Percentile Range|
|% Within Range|
|1||1570 - 1875||95-100||6%||0.03%|
|2||1510 - 1569||69-94||26%||0.09%|
|3||1450 - 1509||34-68||35%||0.24%|
|4||1340 - 1449||2-33||32%||0.84%|
|5||1001 - 1339||1||1%||4.70%|
What does it mean if a stress score is "Zero?"
Financial Stress scores are not calculated for those businesses designated as "Discontinued at This Location," "Open Bankruptcy," or "Higher Risk." These records are automatically assigned a score of zero (0).
What are Risk Categories?
Risk categories were created to make it easier to translate the Financial Stress Class into understandable risk groups:
|Classes 1–2:||Low Risk of financial stress|
|Class 3:||Moderate Risk of financial stress|
|Classes 4–5:||High Risk of financial stress|
Based on changes to your Financial Stress Class, D&B takes a proactive approach to notify you when a change in Class is bringing you closer to a different risk category.
As an example, if your Financial Stress Class declined from 2 to 3, you would receive a message within your alert that you are approaching a High risk category (Class 4 or 5). That is, one more decline in class (from 3 to 4) would categorize you as high risk.
What influences my Financial Stress Score?
Your Financial Stress Score reflects past payment performance, demographic and financial information, and outstanding suits and liens.
Here are some of the elements used in creating the Financial Stress Score:
Who uses the Financial Stress Score and for what purposes?
Potential business partners, banks and other financial institutions use the Financial Stress Score for various risk based decisions including:
How can I improve my Financial Stress Score?
You can improve your Financial Stress Score by addressing those areas of your business that most influence the score. Here are some steps you can take:
© 2013 Dun & Bradstreet Credibility Corp.