One more financial service, credit ratings, has found a place for itself on the Internet. In June, Standard & Poor's introduced CreditModel, an Internet-accessible set of sophisticated computer models used to produce quantitative estimates of creditworthiness.
While S&P stresses that CreditModel reports "scores" and not S&P ratings per se, the CreditModel quick hit could prove very cost-effective. S&P clients generally pay an average fee of $40,000 to obtain a credit rating, whereas a CreditModel score could be gained for a couple hundred dollars.
The impetus to create CreditModel came from banks, says James Satloff, a managing director of global product development at S&P. However, he says, it can be helpful to others. "Corporations have a number of counterparties to deal with, such as suppliers and entities in transactions and portfolios, and a majority of these firms are unrated." CFOs want to have more confidence that the baseline credit of these counterparties are what they should be, he says. The CreditModel score, Satloff continues, has a high degree of predictability with respect to what the entity's rating would be if only financial data were used.