subject: Experian's New Business Credit Score Better Evaluates Small Business Risk [print this page] For the past two or three years, banks and lenders have said they are unsure of the market and uncertain about the stability of small business. This has not been a good thing for small business lending.
Experian announced today that they are rolling out a new Scoring System that allows them to better evaluate Small Business Credit Risk. The program is call Small Business Credit Share(SM) financial acquisition score.
This business credit score predicts the likelihood that a small business client or prospective will become "severely" or "chronically" delinquent on a business loan, business credit card, line of credit, or a lease within the next year.
This score is supposed to be highly predictive. The system is also supposed to allow lenders and banks to maximize their customer relationships by providing them with more attractive credit terms and limits.
As most borrowers and business owners know, banks and commercial lenders have been "tighter" these past 2-3 years. This Score is a tool that should enable lenders to accurately and confidently assess small-business risk.
Experian states, "Experian's Small Business Credit Share is a data reciprocity program that enables members across multiple industries to contribute more detailed commercial payment information than is typically provided. In exchange, members receive access to unique account data from financial and nonfinancial trade contributors. The new financial acquisition score is available exclusively to Small Business Credit Share members."
Other benefits may include:
* The new financial acquisition score
* Market intelligence through customized portfolio benchmarking
* Proprietary collection tools, including Delinquency Notification Service(SM)
* Portfolio risk scores that predict delinquency at the product level
Experian(R), a global information services company, launched Small Business Credit Share(SM) financial acquisition score. The new commercial credit score predicts the likelihood that a small-business applicant will become severely delinquent or chronically delinquent on a financial instrument such as a commercial credit card, an installment loan or a lease within the next 12 months. The highly predictive financial acquisition score allows Small Business Credit Share members to maximize their customer relationships by providing them with more attractive credit terms and limits.
Time will tell if it really helps or hurts lending - or if it helps or hurts the amount of loans being approved. It does sound like the system offers favorable data sharing and analysis. However, it is unclear how banks and lenders will really use the information and whether or not it leads to an improvement in lending and market liquidity. Let's hope!
