|
Keys to Scores, Ratings & Indices
D&B Risk Assessment Manager (RAM) allows you to turn your credit and collection policies into an electronic score rated on a scale of 10, with higher scores representing lower risk. Your RAM score is as unique as your company. Its interpretation is based on factors such as your company’s risk tolerance and cost of sales, and you can customize RAM settings to suit your needs.
When creating your score card — which is what drives the RAM score — you can use D&B data, customer information you import from your accounting system, and data you enter manually. Some D&B data is self evident (e.g. three suits for $1.5 Million), and other data you purchase from us has already been converted to indices (e.g. score numbers).
This page provides keys to the most common D&B scores, indices and ratings. If you have any further questions, please call us at 1.800.894.9888, e-mail CustomerCareCan@dnb.com or fill out the RAM feedback form.
This is a simple numeric score, exclusive to D&B. The Paydex score is derived from the combined individual payment experiences of a business, indicating its current payment posture. These values are weighted according to the amounts of credit extended.
The Paydex scores are updated daily, so payment changes are quickly identified.
Score |
Payment |
Score |
Payment |
100 |
Anticipate |
40 |
Slow to 60 |
90 |
Discount |
30 |
Slow to 90 |
80 |
Prompt |
20 |
Slow to 120 |
70 |
Slow to 15 |
UN |
Unavailable |
50 |
Slow to 30 |
|
|
Key to D&B Paydex score quartile (norms):
Upper quartile norm: The payment scores you see here for each quarter of the previous and current years represent how the best-paying businesses (top 25%) in this industry pay their suppliers on average.
Median norm: These scores represent how the in-between segment of the industry (middle 50%) pay their suppliers on average.
Lower quartile norm: These scores show how the lower segment (last 25%) pays their suppliers on average.
‘A’, ‘B’, ‘C’ and ‘D’ Paydex quartiles are not part of the standard RAM packet, but they are available as a custom data element for full-file monitoring within RAM.
A: Indicates a company that pays their bills faster than the upper norm.
B: Indicates a company that pays faster than the median, but slower than the upper norm.
C: Indicates a company that pays slower than the norm, but not as slowly as the lower norm
D: Indicates a company that pays slower than the lower norm.
D&B Composite Credit Rating (Canadian
This unique D&B rating shows the financial strength and overall health of a business.
Estimated financial strength |
Composite credit appraisal |
|
High |
Good |
Fair |
Limited |
5A: 50,000,000 and over |
1 |
2 |
3 |
4 |
4A: 10,000,000 to 49,999,999 |
1 |
2 |
3 |
4 |
3A: 1,000,000 to 9,999,999 |
1 |
2 |
3 |
4 |
2A: 750,000 to 999,999 |
1 |
2 |
3 |
4 |
1A: 500,000 to 749,999 |
1 |
2 |
3 |
4 |
BA: 300,000 to 499,999 |
1 |
2 |
3 |
4 |
BB: 200,000 to 299,999 |
1 |
2 |
3 |
4 |
CB: 125,000 to 199,999 |
1 |
2 |
3 |
4 |
CC: 75,000 to 124,999 |
1 |
2 |
3 |
4 |
DC: 50,000 to 74,999 |
1 |
2 |
3 |
4 |
DD: 35,000 to 49,999 |
1 |
2 |
3 |
4 |
EE: 20,000 to 34,999 |
1 |
2 |
3 |
4 |
FF: 10,000 to 19,999 |
1 |
2 |
3 |
4 |
GG: 5,000 to 9,999 |
1 |
2 |
3 |
4 |
HH: up to 4,999 |
1 |
2 |
3 |
4 |
Factors considered in Composite Credit Appraisal Ratings (1,2,3,4)
This chart contains general guidelines for delivering a composite credit appraisal rating. The various factors or conditions require balancing and weighing that is often complex, taking into consideration numerous variables, before a rating can finally be determined.
Each new situation can be unique, and there are exceptions to almost every guideline. (In a given instance for example, one factor alone may have a significant impact on the rating assigned.) The final rating is assigned by a senior D&B business analyst, with exceptional cases going to our National Rating Committee for review and approval.
|
1st line (high) |
2nd line (good) |
3rd line (fair) |
**4th line (limited) |
|
If all conditions listed below are favourable |
If most conditions listed below are favourable |
Still considered credit worthy, but with some of the following unfavourable elements |
Even greater elements of risk, credit-worthiness limited |
Payments |
Satisfactory; suitable explanations for any slowness |
Generally satisfactory; suitable explanation for slowness |
Significant slowness |
Significant, even chronic slowness |
Finance |
* Statements regularly obtained;
Usually comparative figures;
Strong condition;
Upward trend |
* Statements obtained;
Sound condition;
Trend usually favourable |
* Statement obtained;
Condition unbalanced;
Operating losses;
Impaired cash flow;
Heavy debt |
* Statement obtained;
Condition unbalanced;
Even heavier losses and debt |
History |
At least one year back — three years preferably;
Adequate assurance of ownership |
No minimum years if other factors satisfactory;
Adequate assurance of ownership |
Adequate assurance of ownership |
Adequate assurance of ownership |
Antecedents |
Experienced in all aspects of business management;
No recent business failures, felonies, charges or convictions that would have a serious impact on business |
If new, previous experience in line or in successfully managing a previous business;
No recent business failures, felonies, charges or convictions that would have a serious impact on business |
May lack balanced experience, or experience in line;
Consider impact on business of any recent business failures or felony convictions |
May lack balanced experience, or experience in line;
Consider impact on business of any recent business failures or felony convictions |
Other |
Other factors considered for their possible favourable or unfavourable influence on a business include: operation or location, bank records, public record information, general economic factors, and industry or local conditions. |
* “Book” figures are required where tangible net worth is $50,000 or more. In cases where tangible net worth is under $50,000, ratings can be assigned based on estimates, preferably signed by a company principal.
** “Limited” or 4th line ratings: A business is given a limited rating only if it has managed to operate in spite of unfavourable conditions over a significant period of time. It is often more appropriate, especially with larger, and thus more complicated concerns, to assign a blank (--) rating. The latter indicates the absence of a rating and the advisability of drawing the D&B report for full details.
Capital ratings (estimated financial strength) are derived by what is usually a comparatively simple mathematical procedure. Determining the tangible net worth produces the capital rating.
General Classification Based on Estimated Strength and Composite Credit Appraisal
Estimated financial strength |
Composite credit appraisal |
|
Good |
Fair |
Limited |
1R |
10 employees and over |
2 |
3 |
4 |
2R |
1 to 9 employees |
2 |
3 |
4 |
ER (Employee Range Designation
Certain businesses do not lend themselves to a D&B rating. Instead, these business reports carry an employee range (ER) designation, which is indicative of size based on number of employees. No other significance should be attached to this classification.
Key to employee range designation |
ER1.....................................................1000 or more employees
ER2.........................................................500 to 999 employees
ER3.........................................................100 to 499 employees
ER4.............................................................50 to 99 employees
ER5.............................................................20 to 49 employees
ER6.............................................................10 to 19 employees
ER7.................................................................5 to 9 employees
ER8.................................................................1 to 4 employees
ERN.....................................................................Not available |
FB (foreign branch): Indicates that the headquarters of this company is located in a foreign country (including the U.S.). The summary section of the report contains the location of the headquarters.
FBN: These letters indicated on a report mean that the business is not listed in the reference book and that the headquarters is located in a foreign country.
NLP: These letters mean that this firm does not appear in other D&B publications.
NQ: This is a D&B rating indicating that a particular legal entity is no longer trading due to amalgamation, a buy-out, or operations having ceased (including business failure or dissolution). It is also used for businesses that we could not locate using our extensive investigative resources.
D&B Rating— United States
The American D&B rating measures overall creditworthiness on a scale of 1 to 4, based on key credit information in our files such as payment activity, financial condition, years in business and public filings. Our creditworthiness assessment is based on both slow pay and default, and the size of a company can give you valuable insight on its credit capacity.
For those companies without current financial statements on file, we use our extensive information base to assign “1R” and “2R” ratings. These ratings are based on employee size and a “2”, “3”, or “4” creditworthiness indicator based on elements such as public filings, trade payments and business background. As above, the size of a firm can give you a good indication of its credit capacity, and these ratings have the same powerful reliability of D&B’s traditional ratings.
D&B Rating — International
The Financial Strength Table |
Net worth |
Capital |
Range |
5A |
5AA |
50,000,000 and above |
4A |
4AA |
10,000,000 to 49,999,999 |
3A |
3AA |
1,500,000 to 9,999,999 |
2A |
2AA |
750,000 to 1,499,999 |
1A |
1AA |
375,000 to 749,999 |
A |
AA |
188,000 to 374,999 |
B |
BB |
94,000 to 187,999 |
C |
CC |
47,000 to 93,999 |
D |
DD |
24,000 to 46,999 |
E |
EE |
12,000 to 23,999 |
F |
FF |
6,000 to 11,999 |
G |
GG |
Up to 5,999 |
NQ |
Out of business |
Subject ceased operations |
NB |
New business |
Usually less than 2 years and 6 months |
O |
Net worth undetermined |
Accounts unavailable or older than 18 months |
N |
Negative net worth |
Balance sheet shows negative net worth |
FB |
Foreign branch |
Subject is a branch of a company located in another country |
BR |
Branch |
Subject is a branch location |
- |
Net worth undetermined |
A situation exists which is not ratable |
The Risk Indicator Table |
|
Condition |
Level of risk |
Guide to interpretation |
1 |
Strong |
Minimal risk |
Proceed with transaction — offer extended terms if required |
2 |
Good |
Low risk |
Proceed with transaction |
3 |
Fair |
Slightly greater than average risk |
Proceed with transaction but monitor closely |
4 |
Unbalanced |
Significant level of risk |
Review each case before extending credit and obtain more information; take suitable assurances before extending credit, guarantees may be needed |
S |
Service Companies |
- |
Due to nature of businesss, no condition is assigned |
- |
Undetermined |
- |
Insufficient information to assign a rating |
Explanation of D&B Record
Indicates the history of the business and its management. It may be one of the following:
Clear |
No criticized failures, fires or convictions — either business or personal. Also indicates full information is contained about the background of its principals, including either:
- Information covering the last 14 years.
- Information back to the age of 21.
- Information covering the last three jobs the person held.
|
Business |
Used when the following information relates to the business itself, a parent corporation, or a subsidiary:
- The business files for receivership or initiates a proposal
to creditors in the past 14 years.
- The business has had a criticized fire within the last 14 years.
- The business has a record of recent judgments issued or
unsatisfied, involuntary liens. (Infrequent judgments
issued against the company will not mandate a business record.)
|
Management |
Selected when the following information pertains to one or more of the individuals identified in the ownership or management of the business:
- Criminal actions against those persons as individuals.
- Individual bankruptcies and bankruptcies related to
companies affiliated by common ownership or
management in the past 14 years.
- Instances when one of the principals had been
associated with a concern which left unpaid
obligations within the past 14 years.
|
Incomplete |
When management has declined to provide information on the background of the company and owner(s) and the investigation outside quarters has resulted in:
- Incomplete identification of principals of the business.
- Instances where none of the three conditions required
for a clear record were satisfied.
- Gaps in the history of the principals.
|
This score relates to the probability of business closure in the next six months. It is built on a scale of 0 to 10 where 0 represents lower stability (0 = more risk) and 10, higher stability (10 = less risk).
The score is computed using regression analysis on the available data in D&B’s information database. The 97 different variables include financial information, payment habits, legal filings, line of business, region (location) and the number of years in business. The business ‘model’ is validated statistically and has a 95% confidence interval.
By cross-referencing the company’s score with the norms for its industry, you can gauge the relative risk of dealing with the company compared to others in the same line of business.
Score |
Probability of closure |
Score |
Probability of closure |
10.0 to 9.1 |
0.66% |
5.0 to 4.1 |
3.66% |
9.0 to 8.1 |
1.04% |
4.0 to 3.1 |
4.58% |
8.0 to 7.1 |
1.41% |
3.0 to 2.1 |
6.12% |
7.0 to 6.1 |
1.74% |
2.0 to 1.1 |
8.76% |
6.0 to 5.1 |
2.58% |
1.0 to 0.0 |
15.08% |
Standard Industrial Classification Codes (SIC Codes
This coding system categorizes a business establishment based upon the type of business activity performed at its location. This system includes all fields of economic activity, including both manufacturing and non-manufacturing operations.
The system divides economic activity into 10 major areas, identified by the first two digits on an eight-digit code.
Line of business |
Two-digit SIC |
Agriculture, forestry and fishing |
01-09 |
Mining |
10-14 |
Construction |
15-17 |
Manufacturing |
20-39 |
Transportation, communication, utilities and sanitary services |
40-49 |
Wholesale trade |
50-51 |
Retail trade |
52-59 |
Finance, insurance and real estate |
60-67 |
Services |
70-89 |
Public administration |
90-98 |
Four and eight-digit SIC codes contain more specific descriptions of the various industrial classifications. For example:
|
|
|
