Credit Reports/Sources of Credit Reports/Indirect Sources of Credit Information

Indirect Sources of Credit Information
Every experienced credit manager can recount instances when “going direct” in an investigation or a personal visit turned up pertinent information about a credit applicant that was otherwise unavailable. However, as we mentioned above, the truth is that many international credit managers today have neither the staff nor the time needed to conduct thorough direct credit investigations, especially when dealing with overseas markets. Instead, they turn to a third party.

In order to appreciate the list of indirect sources of credit information provided below, we need to explain how the data which is provided from these credit agencies (through credit reports purchased by the seller or exporter) is created. For starters, all information today is automated and is usually obtained via CD-ROM or down¬loaded directly from a mainframe computer. Automation and technology have made credit reports more attractive to credit executives for several reasons.

Combined with vast databases, computers can provide information about companies nationwide. Large companies today deal with tens of thousands of customers that are more and more often not geographically local to them. The level of effort required for direct investigations on large numbers of customers is beyond the means of most companies and would take far too much time.

Reports can be generated instantly and sent electronically or faxed for same day responses. Decisions about credit applications are time sensitive. There is usually urgency for a fast decision in order to make a sale. The ability to obtain a credit report on a same day or one-day basis can affect a company’s revenues.

The cost benefit of using credit reports, or reports purchased externally by the seller or exporter, is high. The salary of a credit investigator can pay for more credit reports in one year than the investigator could produce in one year. There are also additional savings in telephone, postage, supplies, storage, and overhead costs.

Credit reports can provide additional marketing data for the company. Examples are checking a customer’s trade lines for growth and, therefore, the possibility of additional sales or reviewing trade terms for customers according to their credit risk. Some credit reporting companies also provide relational information reports.

A number of agencies provide business information reports on companies located inside as well as outside the United States. Some of these also provide domestic credit reports, while others focus primarily on non-U.S. companies. FCIB, Dun & Bradstreet, Experian, SJ Rundt, OECD, Graydon America are some of the groups that report on non-U.S. companies. In general, reports on foreign companies are similar in content and format to domestic reports. They may be purchased individually or contracted for in advance.

International Company Profile
The International Company Profile (ICP) is a service provided by the U.S. Department of Commerce Commercial Service. ICP’s are available on companies located in over 80 countries. The exporter is charged a small fee for each ICP and the information is provided within 10 days or less. The ICP includes:
 * A detailed credit report on prospective sales representatives
 * A listing of the company’s key offices and senior management.
 * Banking and other financial information about the company
 * Market information, including sales and profit figures as well as potential liabilities.
 * An opinion by the overseas U.S. Commercial Staff as to the viability and reliability of the overseas company or individual as well as an opinion on the relative strength of the company’s industry sector in the target market.

FCIB
FCIB-NACM, an association of executives in Finance, Credit and International Business, is a wholly owned subsidiary of NACM which serves professionals involved in worldwide export financing, credit, treasury and international subsidiary management. The purpose of the association is to raise the level of expertise and professionalism of members and to provide enhanced job enrichment through relevant discussion and exchanges of experiences. Among the services FCIB provides are:
 * Conferences. FCIB holds regional US meetings, three international conferences and an annual Global Conference, all of which focus on current worldwide credit, collection and exchange problems as well as in-depth country discussions.
 * Industry Export Credit Groups. FCIB operates eight export credit groups in the US and Europe. The groups meet to discuss past experiences of individual mutual accounts as well as general country problems specific to the industry.
 * International Bulletins and Newsletters. Current changes affecting credit, ¬collection and exchange conditions throughout the world are reported in the FCIB international bulletin which is distributed to all members. The bulletin presents a “reader’s digest” for members and is an invaluable aid to keep them abreast of ever-changing conditions in world markets normally not discussed at meetings.
 * Country Reports. These reports summarize current experience of international finance and credit managers, capturing timely, in-depth information on the credit risks of export sales in 16 countries. FCIB’s country reports assist international credit professionals to forecast foreign exchange availability, transfer risks and prospective currency changes.
 * International Credit Reports. FCIB, because of its large volume, is about to offer its members access to the major international credit reporting agencies at attractive prices.

Dun & Bradstreet
The largest general reporting agency is Dun & Bradstreet (D&B). It has information on more than 92 million firms world-wide, although not all of it is complete. While firms have to voluntarily give trade data, D&B is the one of the few agencies that uses reporters to gather information about companies.

Business Information Report
This is the basic credit report, which is developed by D&B reporters. (Information is obtained from direct interview with the business owner, partner, or corporate officer. It is then confirmed and expanded through investigations with the business accountant, banks, and supply sources (for payment experiences); by checking public records at federal, state, and county levels; and from a review of D&B’s own internal files. After all the information is analyzed to determine the strength and desirability of the account as a credit risk, a D&B rating is assigned, and the data are compiled into the written Business Information Report.

While reports are normally scheduled for updating every six months, revisions are made whenever circumstances warrant. Other information, when uncovered, is issued in a report form called the Special Notice. These flyers contain data on such items as fires, floods, deaths, tax liens, suits, judgments, new products, and branch openings. When the information is of such nature as to affect the credit rating, either upward or downward, the entire report is revised and a new rating is assigned.

D&B Rating
Each full rating involves two factors: first, a double-letter or number-and-letter combination identifying financial strength; second, a single-digit number on a scale of one to four, indicating the composite credit appraisal as high, good, fair, or limited. Ratings are a convenient method of measuring accounts in addition to serving as a broad basis for credit insurance classifications.

D&B Reference Book
Key information extracted from the Business Information Report forms the basis for listing in the D&B Reference Book. A “P” at the end of the listing indicates that a Payment Analysis Report is available on the particular business. Some listings are prefixed by the letters “A” or “C.” The “A” identifies a business listed for the first time. A “C” prefix signals a change in rating since the prior edition. The Reference Book contains nearly three million listings of commercial enterprises in the United States, Puerto Rico, and the Virgin Islands, arranged alphabetically by cities within states. The Reference Book is updated and republished every 60 days.

Payment Analysis Report
This features the PAYDEX (a numerical scoring system) score shows an instant overview of the firm’s payment habits. Seasonal variations, payment performance trend, and the historical payment pattern are graphically illustrated.

Experian
Experian is the credit reporting business that was formerly TRW. It differs from the other reporting services by including very small businesses and sole proprietorships in its data base as well as larger companies. Experian has an easy-to-follow menu on its website that allows a credit manager to obtain either of the two reports below via the Internet using a credit card to pay the fee.

Experian Intelliscore
Experian uses statistical methodology to give each business in its data base a composite credit risk ranking between 1 and 100 (best). It is designed for credit managers processing large volumes of credit applications or transactions. Companies using this service can establish multiple scoring ranges with assigned actions, so accounts that need further investigating are clearly indicated.

Relationals Information
Experian also offers companies relational credit information that they can use with electronic filters to enhance their credit decisions, set benchmarks, and fine tune sales tactics.

Business Profile
Companies can obtain a business profile of a customer that includes financial information from Standard & Poor’s, the average number of days late (DBT) a company pays its bills past the invoice due date and a predicted DBT 60 days in the future, payment trends for the company and its industry, and UCC filing data.

SJ Rundt & Associates
A reporting agency, this firm provides two reports: the World Business Intelligence -a weekly briefing dealing with 14 to 16 countries each, assessing the latest economic and political developments, focusing on those that are important, explaining what they portend for the future in international trade, investment and finance, interest rate and exchange rate tables and forecasts. The second report is the Financial Executive Country Risk Alert issued three times per year which is a combination of forecasts and survey results assessing export credit and short-term financial risk for over 100 countries. Risk ratings on a scale from 1 (best) to 10 (worst). Between full updates, countries are subject to weekly reviews and are updated individually (and re-rated, if necessary).

Organization for Economic Cooperation and Development (OECD)
The OECD is a Paris-based intergovernmental organization, established under a 1960 convention, whose purpose is to provide its 29 member countries with a forum in which governments can compare their experiences, discuss problems they share and seek solutions which can be applied within their own national contexts. The fundamental task of the OECD is to enable its members to consult and cooperate with each other in order to achieve the highest sustainable economic growth in their countries and to improve the economic and social well-being of their populations. The original members of the OECD were the countries of Europe and North America, followed by Japan, Australia, New Zealand and Finland. Just recently, Mexico, the Czech Republic, Hungary, Poland and Korea have joined.

The OECD publishes various booklets which assess economic trends and prospects. Many statistics are available through its on-line bookstore.

Other Private Credit Companies
Intl Reporting & Co., Inc. is the largest supplier of consumer credit reports for foreign nationals coming to the US for mortgage purposes. Graydon America, Hoovers and Coface North America are providers of online and offline business credit reports from around the world via the Internet. They have nearly 100 countries online, including Europe and the US. With more than 200 countries offline, sample reports can be accessed through the website.