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Business Credit Scores and Ratings

D&B® Failure Score

What Is the Failure Score?

The D&B Failure Score (formerly the Financial Stress Score) predicts the likelihood that a business will, in the next 12 months, seek legal relief from its creditors or cease business operations without paying all its creditors in full. The Failure Score is derived from the information in the Dun & Bradstreet Data Cloud.

What Does the Failure Score Look Like?

The Failure Score is a multidimensional score comprised of two components: a score of 1 – 100 and a Risk Indicator of 1 – 4. The score is set with the lowest value representing the highest level of risk that a business will fail in the next 12 months. The 4 classes of the Risk Indicator allow you to set cut-offs for decisions based on your company’s credit policy and risk tolerance. It can be used to show the expected level of creditworthy applications/accounts for each Failure Score, which can help to balance the opportunity of increased sales against the risk of bad debt.

Failure Score Risk Indicator Probability of Failure
86 – 100 1 Minimum Risk
51 – 85 2 Lower than average risk
11 – 50 3 Higher than average risk
1 – 10 4 High risk
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How Is the Failure Score Calculated?

Dun & Bradstreet aggregates company information from a variety of sources. These include public records, financial statements, and past payment experiences from vendors (also known as Trade References†). The Failure Score also weighs a company’s demographics against those of similar firms in the same industry. Some data elements used to calculate the score are:

  • Company Type – In general, businesses that are corporations are considered less risky. These businesses can typically secure additional financial support if necessary.
  • Age of Business How long a business has been operating is a measure of stability. The more years a firm has been operating, the lower the risk.
  • Lawsuits, Liens, Judgements The presence and number of open suits, liens, or judgements. (Dun & Bradstreet is the only credit data provider that has public lawsuit filings.) The absence of public filings is considered a positive factor.
  • Net Worth A negative net worth is an indication of higher failure risk, whereas a higher net worth is correlated with a reduction in failure risk.
  • Trade Data The model incorporates the percentage and dollar amount of satisfactory payment experiences in the Dun & Bradstreet Data Cloud. The higher the percentage of satisfactory trade experiences, the lower the risk. Also, the higher the total number of trade experiences, the lower the failure risk.

Why Does the Failure Score Matter?

The Failure Score is designed to help you predict a business’s potential for failure. It uses the full range of Dun & Bradstreet information, including financials, comparative financial rations, payment trends, public filings, demographic data, and more to provide more predictive insight. Using the Failure Score can help you drive growth and increase profitability by:

  • Automating decisions for increased efficiency
  • Processing large volumes of transactions more quickly
  • Moving valuable resources away from clear approve/decline decisions and focusing them on more complex credit decisions
  • Enabling more consistent decisions
  • Applying scores across an entire portfolio to quickly identify potential risk and opportunity
  • Helping to prioritize collections
  • Helping satisfy regulatory requirements for a timely, consistent, and objective decisioning process

What Does It Mean If Your Business’s Failure Score Has Increased or Decreased?

If you’ve been notified that your business’s Failure Score has increased or decreased, consult the infographic below for more detailed information on what this could mean.

How Can I Check My Business’s Failure Score?

By purchasing a Business Credit Report on your company, you can view your scores and ratings. You can also monitor changes to your company’s credit scores and ratings to better understand how your company is viewed in the marketplace.

Who Else Might Check My Business’s Failure Score?

Suppliers, lenders, landlords, and customers are just a handful of business partners who could be interested in your company’s Failure Score. Businesses and financial institutions often consult Dun & Bradstreet’s credit scores in order to help manage risk. A poor Failure Score could make it difficult for your business to access capital or result in less generous loan terms. You could also potentially miss out on lucrative contracts due to concerns about your business’s ability to fulfill its financial obligations.

 

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