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Utilities Sector Post Strongest Commercial Credit Score

By Sally Maison
Published: Sunday, November 15th, 2009

If commercial credit scores are excellent indicators of risks, people might want to count on businesses in the utilities, education, and health service sectors among other businesses. Or at least that is what the most recent benchmark from Experian implies.

Utilities Sector Post Strongest Commercial Credit ScoreThe Experian Business Benchmark Report released yesterday revealed that companies in the utilities business had an average credit score of 70.64, a figure that impressed economists with the national average currently standing at 60.68.

Meanwhile, businesses in the education and health services are also showing impressive performance, posting their commercial rating at 65.03 and 65.29 respectively. Analysts explained that commercial risk indicators, otherwise known as commercial credit scores, are based on a scale ranging from one to 100, with one indicating the highest level of risk and 100 marking the lowest.

On the flip side, businesses in the retail and hospitality sector are showing signs of struggle, posting the lowest commercial credit scores at 56.66 and 56.12 respectively. In general, almost every industry group is showing a decline in its commercial risk score, which implies that a higher average risk of delinquency in the next 12 months can be expected.

Experian also found out that businesses employing more than 220 people saw a drop in their percentage of delinquent dollars outstanding. On the other hand, businesses with one to 19 employees recorded an increase in their percentage of delinquencies. Compared to all other businesses, those with more than 250 employees are faring best, posting the lowest rate of severe delinquency. While the national average of delinquent dollars outstanding is 5 percent, firms employing more than 250 employees only had 2 percent of their dollar outstanding.

Specialists explain that having a strong commercial credit score is important for businesses to gain the trust of consumers since analysts use it to summarize risk information. Businesses and other firms which have very low ratings show that they are having financial struggles. Experts explained that those at the bottom of the ratings have big chances of failing, and are expected to either go insolvent or bankrupt.
Additionally, some firms avail the services of scoring companies to determine whether a new customer is a good or bad risk. Rating companies keep track of the financial performance of different business sectors all year round and summarize gathered data through their annual reports.

Industry specialists add that the independent performance of companies is also monitored to help firms and individuals determine whether it risky to do business with a company. Businesses are advised to check the risk level of a potential partner before trading or signing a credit term.

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