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Credit ratings in Customer Portfolio

Upsales uses a credit rating system to forecast for the likelihood of a company going bankrupt within the next 12 months. Understanding how this scoring system works will help you navigate the complex landscape of business partnerships and investments.

This article covers:

  • The credit rating
    • Risk Categories (A to E)
    • Special Cases (Category F - No Assessment)
    • Other Non-Assessable Events (Category "Other")
  • The Statistical Model

The credit rating

The rating is a numerical representation of a company's financial health and stability, based on a statistical model.

It falls on a scale from 1 to 100.

A higher number indicates a lower risk of bankruptcy. A lower number suggests a higher risk.

This rating is a valuable tool for assessing the financial viability of your customers and investment opportunities.

Risk Categories (A–E):

Ratings are placed into risk categories.

These represent a certain risk forecast:

  • Category A: Scores 80-100
    Very low risk of bankruptcy (0,0001 - 0,2526%)
  • Category B: Scores 60-79
    Low risk (0,2526 - 0,8658%)
  • Category C: Scores 40-59
    Moderate risk (0,8658 - 2,9231%)
  • Category D: Scores 15-39
    High risk (2,9231 - 12,3937%)
  • Category E: Scores 1-14
    Very high risk (12,3937 - 100%)

These categories help you quickly understand the risk associated with a company based on its credit rating.

Special Cases (Category F = No Assessment):

Some companies may have events or circumstances making it impossible for us to provide a credit rating.

These events include:

  • Bankruptcy
  • Forced liquidation
  • Reconstruction
  • Distraint
  • Bankruptcy application
  • Company is dissolved
  • Company is delisted
  • Not an active company

In these cases, we categorise tthe company as "F" and assign a rating of 0.

This indicates that we cannot assess risk of bankruptcy for these companies. They may already be in the process of bankruptcy or have ceased operations.

Other non-assessable events (category "Other")

Other events preventing us providing a credit rating include:

  • Incomplete data
  • Auditor missing
  • CEO missing
  • Deficiency in accounts
  • Bad debt
  • No account
  • And several other events...

For companies with such events, we categorise their credit rating as "Other,"

This means we cannot assign a number or category. These companies are subject to unique circumstances that prevent a standard assessment.

The statistical model

The credit rating is determined by a statistical model tailored to the type of company.

This model takes various factors into account, such as:

  • Payment remarks
  • Financial health
  • Board composition

Weighing these factors against each other gives you a comprehensive and data-driven assessment of credit rating.

The rating system and risk categories are designed to provide you with the information needed to assess the financial health of potential partners or investment opportunities accurately.

Whether you're looking to engage in a business partnership or invest in a company, having a clear understanding of credit rating will support your decision-making.

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Articles in this section

  • Share of Wallet (SOW)
  • Customer portfolio: How it works
  • Credit ratings in Customer Portfolio
  • Risk Assessment among customers

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