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Introduction of Credit Management for Overseas Trade

36 Things You Need to Know About Credit Management for Overseas Trade

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14. Credit Score

When you look at company information reports, the first thing you notice is credit score.


In the case of Creditsafe (CS) company information reports, the importance of visuals makes it possible to judge risks intuitively. Green is acceptable for credit, red is not. In addition, it appears that it is easy to judge the point which adopts the rating of 100-point perfect score system familiar to Japanese.


However, it should be noted that the criteria for evaluation are significantly different from Japanese scores.


The significant difference is that the rating of the CS is an objective assessment based on the probability of bankruptcy, while the rating of the Japanese credit reporting agency is a subjective assessment that is mainly evaluated by a personal reporter. The investigators come with the Japanese score which is said to be concentrated from 45 to 55. If a subject with a high rating goes bankrupt in a certain period, the reporter who scored the high rating will be penalized.


In addition, it is pointed out that there are also negative effects that the reporter is also working as a salesperson. It is for an act of intentionally raising the evaluation of the subject in which it operates to have many tickets bought.


On the other hand, CS ratings are based on bankruptcy probability and there is no arbitrariness. It can be used safely as an objective index.


The CS rating is an indicator that predicts the probability of the company going bankrupt within the next 12 months. 100 is the highest credit rating while 1 is the lowest credit rating.


For example, UK ratings are as follows.

What needs attention here is that rank C is not a company that needs attention. According to the Japanese rating, the 40-point level is considered to be at high risk.


However, CS ratings indicate average risk and credit transactions are possible. This is based on the probability of bankruptcy and is a statistically normal distribution. The CS rating draws a smooth distribution curve while the analysis of the Japanese score becomes trapezoidal.


Therefore, in Japanese rating you can rarely see companies with 90 points, furthermore, 100 points companies are also present. For 29 points or fewer credit transactions should be avoided as the risk is high and L / C trading or trading on a down payment is recommended.

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【PDF】Introduction of Credit Management for Overseas Trade

Introduction of Credit Management for Overseas Trade

36 Things You Need to Know About Credit Management for Overseas Trade

This ebook was created as a resource for those who have trouble with diverse trading or want to learn Credit Management in a rational.


Chapter (Excerpt)

  • Major Differences Between International and Domestic Transactions 
  • Trade Reference
  • Bank Reference
  • Collection Agency
  • Reasons Behind Difficulty in Recovering Delayed Debts
  • Mistakes in International Transactions Where Japanese Companies are Prone to Fail
  • Customer Analysis ~ 5 C's of Credit
  • Dangerous Signs
  • Five Principles of Debt Collection