A recent announcement by Experian prompted an exchange of opinions by a credit group on LinkedIn:

Question: “Experian’s Small Business Credit Share is a data reciprocity program that enables members across multiple industries to contribute more detailed commercial payment information than is typically provided. In exchange, members receive access to unique account data from financial and nonfinancial trade contributors.  I think this is going to be an extremely helpful tool for the commercial collection industry to boost recovery. What do you think?”

Responding comment: “Equifax has had a similar tool called the Small Business Financial Exchange for some time now. I don’t know what the requirements are for Experian’s version, but if you pull data on SBFE, you MUST report into the SBFE. They offer a few different scores, but the one I have the most hope for is the one that combines the principal officer’s credit file and the business file. As we all know, the smaller the business, the more likely these two are to be intertwined.”

Responding comment:  “I like what Experian is doing on the data front and this product looks very interesting. Having a good decisioning platform that leverages the data is equally important. As economic conditions continue to put significant pressure on small businesses, being able to quickly and intelligently prioritize accounts for collections activities based on risk factors is a must.”

Experian’s statement:  Our Small Business Credit Share members include some of the largest small business creditors in the country. Based on client validations, the Small Business Credit Share scores have proven to be highly predictive on financial portfolios with the ability to capture up to 80% of bad accounts within the worst scoring 20% of the population. We attribute this success to the integrity and exceptionally high quality of our data, combined with the fact that we developed our scores using performance information from both before and after the onset of the current recession. Another factor contributing to the score’s strong performance is that we evaluated more than 3,700 attributes in order to identify those most effective in predicting financial product risk. These attributes are able to distinguish performance characteristics at the product level (for example commercial card vs. loan vs. line of credit, etc) providing greater insights into how a small business is likely to pay those obligations.  Source:  Credit Risk Managers Group on LinkedIn

BIIA Newsletter May I – 2010 Issue