There are a number of differences between the old and new scorecard. All changes have been made to improve the accuracy of its scores so that they provide true representation of the risk associated with a business.
It is crucial that our scorecard is accurately calculating the likelihood of company default based on current market conditions. Therefore, when developing the new scorecard, the most up-to-date business information available was used. Naturally, as the economy and market conditions change from one year to the next, the calculations behind the score must be adjusted for the score to remain highly predictive.
Following on from recent market analysis and refinement of the variables utilised to assess stability we have seen some shifts in company scores.
Most importantly you will notice that we have introduced a new micro-entity model to the scorecard. With over 90% of limited businesses registering as a micro-entity we have devised a model which exclusively scores these businesses based on the data available for them. As a result, we have improved the accuracy of their scores overall, enabling us to grant many of them a creditworthy score as well as a suitable credit limit.
We have also adjusted the Non-Limited Business Model to reflect the greater stability we have seen across this group. With fewer bankruptcies and CCJs, Non-Limited Businesses are showing promising signs of strength. To reflect this, more Non-Limited businesses are granted a creditworthy score and suitable credit limit.
With deeper business segmentation we have achieved a more representative distribution of business across the different risk bandings. Businesses classified as low risk within our UK Scorecard, on the whole, have a lower probability of default than the previous scorecard. Similarly, the high-risk segment of the population with a score below 30 have a slightly higher probability of default overall. This has been implanted to give a true reflection of high-risk scenarios, so as to prevent stifling your business by dismissing opportunities for growth.
Please refer to our Probability of Default table for a full representation of risk across the scores.