JBT to 'Enhance' Credit Ratings

The Jewelers Board of Trade, the industry's credit reference bureau, has rearranged its credit-rating system to give members more data to assess the credit risks of listed accounts.

Starting January 2006, it will use new “Other Condition” codes and, for the first time, a numerical “Payment Score” to describe companies without capital ratings. “This methodology is more comprehensive and complete, more timely and consistent,” says Dione D. Kenyon, JBT president.

In a break from the past, all 70,000-plus accounts in JBT's database will carry credit information, either a rating or a payment score and description. That includes all 32,700 listings in JBT's “Red Book” reference guide. Currently, only 23 percent of companies in the “Red Book” are assigned capital ratings. The rest are nonrated, or blank, because of unavailability or inadequacy of financial data.

JBT will publish the updated criteria in a special CD-ROM edition of its “Red Book”, mailed free January 2006 to JBT members; in the March 2006 print edition of the “Red Book”; in JBT's weekly Service Bulletin (also available on its Web site as part of its membership services); and on JBT credit reports.

There are two main changes in JBT's rating system. The blank (noncapital) rating is replaced by 10 “Other Condition” ratings, using three-letter codes to show why a capital rating isn't assigned. For example, “FIN” stands for lack of current or complete financial statements; “NEW” means a business is less than three years old.

The other change is using JBT's Payment Scores if JBT has adequate trade references on file for a company and a sufficient track record for JBT to monitor.

To the Scores' familiar 1–4 system (based on promptness of payment), JBT has added “0,” indicating not enough trade information about a company, no JBT track record, or it's in bankruptcy/receivership.

The new system should help “people distinguish better between levels of credit risk in making their credit decisions,” says Kenyon. But there are other advantages, too, she notes.

It will spotlight companies with good payment records, even if they have no capital rating because they don't disclose their financials—as well as those who don't pay so promptly. There will be an increase in rated accounts with descriptive conditions and/or payment scores, providing more information for members and the industry to assess relative credit risk among accounts. From a marketing perspective, expansion of the rating system gives members more options for mailing lists, which are better segmented now—not only by geographical location but also by Payment Score, Capital Ratings, and (new) Other Condition codes—to reach target markets.