When Cortera was founded over 20 years ago, the goal was to provide useful business information at a very reasonable cost. Instead of following the mold that our predecessors had created, we set forth with a different strategy, incorporating predictive, industry-specific data that had yet to be seen by B2B credit managers. The application of this very particular data led to the creation of two different business credit scores that are currently used in all of Cortera’s business credit reporting and monitoring services. In the article below, we outline the two scores by explaining how they differ from each other and how to get the most out of using each.
Cortera Payment Rating
The Cortera Payment Rating (CPR) does exactly as it says; it rates a business’s payment behavior. On the corporate level, this score links the parent company with its various locations throughout the country, keeping you aware of anything significant at the top of the funnel. CPR scores can range anywhere from 100 to 900. Companies with a higher score are less risky. For example, if a business has paid its providers and suppliers relatively fast over the past 3 months, their CPR score would be on the higher end of the spectrum.
Along with the CPR score comes a payment risk segment, where a single factor will indicate which overall risk category the company should be assigned. The return value is a number range from 1-6, with 1 being the riskiest and 6 being the least. These two numbers directly correlate with each other, so it is likely that a CPR score of 800 or higher would fall within a 5 or 6 on the risk segment. Contrary to that, a business with a CPR score of 100 would likely fall within a risk segment of 1 or 2.
The Cortera Score differs from the CPR in that it is predictive of severe payment delinquency, scaling from 100 to 900. Similar to a consumer credit score, a higher Cortera Score indicates a lower risk. There are many factors incorporated into the predictive nature of the Cortera Score. These include: large spending in top categories, increasing and decreasing spend in top categories, small amount of known spending history, consistently prompt or slow payments, slowing payment trend, large percentage of severe delinquencies, significant recent increase in risk, payments faster or slower than industry benchmark, large or limited number of reported trade relationships, presence of recent bankruptcies, presence of or no known derogatory public records, presence of positive public records, history of data reported, evidence of business size, number of locations, positive or negative loan repayment, limited recent reported data, and industry performance.
The CPR may seem more familiar to credit managers and risk analysts who have worked with other commercial credit bureaus in the past. While it is a great indication of how a business has behaved historically, it includes little evidence to support what they are likely to do in the future. The Cortera Score takes so much more into consideration, particularly purchase behavior which is a leading indicator of a company’s ultimate growth or direction. If a company suddenly stops making purchases from its key providers, this may indicate that they are at risk for financial demise, thus negatively affecting their Cortera Score. Even if they are consistently paying on time, the Cortera Score will be more sensitive than the CPR.
The methodology behind creating two scores and incorporating them into all of Cortera’s products and services is simple: traditional payment scores do not provide enough information to proactively address today’s changing needs. In many industries, especially credit and risk management, you need to stay ahead of changes and trends in order to protect your business. The CPR along with the Cortera score allow B2B credit and risk managers to do just that.