Graydon’s Predictive Credit Scoring

What is a Credit Risk Score?

A numerical expression based on statistical analysis of a credit file, to represent the risk or creditworthiness of that entity.

• E.g. Graydon's AUGUR score ranges from 0 - 600

Credit granters use credit scores as a more efficient and consistent way to:

• Evaluate potential risk
• Mitigate losses due to bad debt
• Qualify new applicants
• Determine interest rates, bad debt provision, credit limits
• Exploit revenue opportunities

Risk Factors

Leading Credit Reference Agencies use data from multiple sources to provide robust predictive scoring. Elements typically include:

Measuring Performance

Independent analysis carried out to measure the predictive performance of four major UK Credit Reference Agencies' risk scores:

• Based on a sample of 25,000 businesses
• Tests:
• Gini coefficient, Kolmogorov Smirnov, Divergence Test, Rank Ordering
• Graydon = Bureau B

Risk Score Applications: Retrospective Ledger Analysis and Calibration

Graydon regularly conducts trade off curve analysis for particular customers and industries. This analysis highlights the optimum Augur score where the majority of companies with a score above could be accepted and given credit, and the majority of companies with a score below could be rejected and not given credit. By completing the analysis, Graydon can advise customers how to optimise their credit-checking process and therefore accept the best possible number of credit applicants.

The optimum score will vary from ledger to ledger, and is an excellent barometer that helps to identify both the level of risk and potential payment default issues of particular industries. For example analysis of the Freight Transport industry shows higher than average payment defaults and higher risk.

Insurer Analysis comparing Graydon predicted payment default versus actual achieved claims: