Leading digital credit reporting bureau, CreditorWatch has rolled out a new tool to provide businesses with transparent insights into the creditworthiness of their trading partners.

The RiskScore tool will enable creditors to understand the likelihood of businesses to default in the next 12 months, protecting them against the increasing number of companies making delayed payments, which is a key indicator of cash flow.

Built in partnership with Open Analytics and using machine learning to analyse nine million tradelines, the tool claims to be the most predictive and insightful risk score in the market. Factors that are analysed include trade payment data, business demographic and geographic risk against the industry average.

It ranks companies based on one of 14 credit ratings (from A1 to F) and numerical score of 0 to 850 with a higher score representing lower risk.

CreditorWatch CEO, Patrick Coghlan said traditional credit scoring methods are simply inadequate and for many firms, onboarding one failing business can have a massive impact.

“CreditorWatch has unique access to public and private data sources, including tradeline behavioural data, text mining and business demographic risk factors, to provide insights that can’t be found by any other credit bureau. As our national economic picture becomes ever more complicated, RiskScore will ensure great businesses are not taken down by failing customers,” he said.

Open Analytics founder, James O’Donnell said an important component of RiskScore is trade payment data.

“This encompasses business-to-business transactions, including information about trading volumes and late payments behaviour, which is very predictive information when it comes to future defaults. It’s never seen before in the industry and will revolutionise the traditional credit scoring process.”

CreditorWatch believes the pandemic has diminished many traditional indicators of creditworthiness with banks permitting deferred payments and government stimulus creating artificial market liquidity.