COSTA MESA, Calif. — At a recent small banking conference, the buzz around the room was that credit unions are faring much better than their counterparts during the ongoing financial market calamity.
That's what John Krickus observed while attending the session. Krickus, a product manager for Intelliscore Plus, a new business-to-business credit scoring system from Experian's Business Information Services, said credit unions were and are in a better position because of additional support.
"Fortunately, credit unions and some banks have a guarantor, but [other industries] may not have had that," Krickus surmised.
To that end, Experian said its newly launched Intelliscore Plus was created to peel back all the layers of potential risks so that credit unions and other financial institutions can really hone in on whether a small business applicant is worth pursuing. Using information entered in an inquiry, Intelliscore Plus sets out to return a score highly predictive of business payment. A credit union can inquire on the business only, the business owner only or a blend of information on both the business and the business owner.
Experian started using the new score with a group of early adopters on Oct. 1, followed by a mass upgrade for clients on Oct. 27. Krickus said for identifying risk in small businesses, blended data has proven the most predictive in the industry citing research that showed blended scores capture 46% more small business deterioration than commercial data alone.
"Sometimes it's driven by cost concerns," Krickus said of that 46% capture. "If you only use consumer information or commercial information, you're missing out on half of deteriorating accounts."
The new score uses statistical techniques and combines more than 800 commercial and owner variables, including tradeline and collections information, recent credit inquiries, public filings, new account activity and key financial ratios to provide clients with fast and accurate risk assessment, according to Experian. Intelliscore Plus also offers the ability to include up to four business owners or guarantors on one report, providing a more comprehensive view on a business with multiple owners, the company said.
Users can also use the score to evaluate large companies, which are defined as those with more than 500 employees, said Dan Meder, vice president, product management and marketing for Experian's Business Information Services. Meder said while the large business niche may not be as courted by credit unions as they are by other financial institutions, the ability to track risks is still a shared trait.
"Big businesses tend to score very low," Meder said. "If you get a score on IBM, for example, it would be low. But if you do a peer to peer comparison, the IBM score would be higher."
For new businesses, segmenting risk "can be a bit picky," Krickus acknowledged. The Intelliscore Plus score can still serve as a tool for credit line renewals and eventually, faster approvals once a strong and consistent payment history has been established.
"One thing of interest is the need to ensure portfolios are in good shape. You can score a certain file and focus on the 30 to 50 that have fallen out [to find out what happened]," Krickus said.
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