====== Intelliscore Plus ======
Intelliscore Plus is a business credit scoring model developed by the credit-reporting agency [[Experian]]. Think of it as a FICO score, but for businesses instead of individuals. Its primary job is to predict the likelihood that a company will become seriously delinquent on its financial obligations—meaning it will be more than 90 days late on a payment—within the next 12 months. The score ranges from 1 to 100, with a higher score indicating a lower risk of default. It’s one of the key metrics that suppliers, lenders, and other business partners use to quickly gauge a company's financial health and reliability. The algorithm behind the score analyzes a vast pool of data, including a company's payment history with its vendors, any public records like [[liens]] or judgments, and other demographic information to generate a single, easy-to-understand number that tells a story about the company's short-term financial stability.
===== How It Works =====
While the precise algorithm is a trade secret, the ingredients that go into the Intelliscore Plus recipe are well-known. The model crunches data from numerous sources to build a comprehensive picture of a company's creditworthiness.
==== The Key Ingredients ====
The score is primarily based on a company's track record of paying its bills. The model looks at several key areas:
  * **Payment History:** This is the most significant factor. The model analyzes how consistently a company pays its suppliers and creditors. It looks at the frequency and severity of late payments. A history of paying on time for [[trade credit]] is a strong positive signal.
  * **Credit Utilization:** The score assesses how much of its available credit a company is currently using. A business that has maxed out its credit lines may be under financial stress, which is a major red flag.
  * **Public Records:** The model scours public filings for negative information. This includes any instances of [[bankruptcy]], tax liens, or court judgments against the company. These are serious indicators of financial distress.
  * **Company Profile:** The algorithm also considers "firmographic" data. This includes the age of the business, its size (number of employees), and the risk profile of its industry. A well-established company in a stable industry is generally viewed as less risky than a new startup in a volatile sector.
==== Reading the Score ====
The output is a simple number from 1 to 100, but it packs a lot of information:
  * **76 - 100:** Low Risk. Companies in this range are considered very reliable payers.
  * **51 - 75:** Medium Risk. These companies are generally in good standing but may have some minor blemishes.
  * **26 - 50:** High-Medium Risk. Caution is advised; these businesses have a higher probability of late payments.
  * **1 - 25:** High Risk. These companies are at a significant risk of severe delinquency or default.
===== Why Should a Value Investor Care? =====
At first glance, a commercial credit score might seem like a tool for suppliers, not investors. But for a savvy value investor, it offers a powerful lens through which to view a company's operational health and management quality.
  * **A Barometer of Financial Discipline:** A company with a consistently low Intelliscore Plus is likely struggling to manage its cash flow. This isn't just a problem for its suppliers; it's a symptom of deeper issues. It could signal weak demand, poor inventory management, or undisciplined [[capital allocation]]. Value investors seek durable, well-managed businesses, and a company that can't pay its bills on time is the opposite of that. It's a massive red flag that could point to a potential value trap.
  * **Assessing [[Counterparty Risk]] and [[Supply Chain]] Health:** When you invest in a company, you're also investing in its ecosystem. A low credit score can damage a company's relationship with its suppliers. They might demand stricter payment terms (e.g., cash on delivery) or stop doing business altogether. This can disrupt the company's supply chain, increase its costs, and ultimately erode its profitability and competitive advantage.
  * **A Clue for Your Own Research:** While you may not have direct access to a company's live score, you can use its principles to guide your own analysis of financial statements. When you're reading a [[10-K]] report, pay close attention to metrics that act as proxies for credit health. For example, is the [[Days Payable Outstanding]] (DPO) metric ballooning? This could mean the company is stretching its payments to preserve cash, a tactic that would certainly hurt its credit score.
===== The Big Picture: A Tool, Not a Crystal Ball =====
It's crucial to remember that Intelliscore Plus is a predictive tool, not a definitive judgment on a company's [[intrinsic value]]. A low score is a warning sign that demands further investigation, not an automatic "sell" signal.
//Context is king//. A company might have a temporarily low score due to a large, one-time investment or a strategic decision to manage working capital. Conversely, a high score doesn't guarantee success if the company's long-term business model is flawed.
For a value investor, the score (or the principles behind it) is best used as a starting point for deeper due diligence. It helps you ask the right questions. Why is this company struggling to pay its bills? Is it a temporary problem in an otherwise great business, or is it a sign of terminal decline? The score doesn't give you the answer, but it tells you exactly where to start digging. It should be used alongside other analytical tools, including a thorough review of financial statements and a qualitative assessment of the business, its management, and its industry. Other scores, like the PAYDEX score from [[Dun & Bradstreet]], can also provide a more complete picture.