Learn more about vendor credit risk assessment and what our scores mean.
What does each risk level mean? +
Low Risk (75-100): Company shows strong payment history, solid financials, and low credit risk. Consider standard terms.
Moderate Risk (50-74): Company is generally reliable but has minor concerns. Consider requiring deposits or shorter payment terms.
Elevated Risk (25-49): Significant concerns present. Limit credit exposure, require deposits or payment guarantees.
High Risk (0-24): Major red flags. Require prepayment, COD, personal guarantees, or decline the business.
How is the credit score calculated? +
Our algorithm evaluates four main components:
Financial Indicators (30%): Payment history, days to pay, AR percentage, credit utilization, collections/bankruptcy history
Payment History (20%): Track record of on-time payments and consistency
Relationship Quality (25%): Length of relationship, responsiveness, dispute history, communication
External Signals (25%): Legal filings, liens, credit scores, ownership changes, industry default rates
All calculations are done client-side, so your data never leaves your browser.
What's a reasonable credit limit based on risk? +
Low Risk: Up to 1-3 months of revenue or contract value
Moderate Risk: Up to 2-4 weeks of average monthly exposure
Elevated Risk: Limit to 1-2 weeks of average monthly exposure
High Risk: Prepayment only or minimal exposure with deposits
Always align credit limits with your company's cash flow requirements and risk tolerance.
How often should I reassess vendor credit risk? +
Assessment frequency depends on risk level:
Low Risk: Annually or every 18-24 months
Moderate Risk: Semi-annually (every 6 months)
Elevated Risk: Quarterly (every 3 months)
High Risk: Monthly or before extending additional credit
Also reassess immediately after late payments, disputes, or significant business changes.
What if they have a bankruptcy in their history? +
Past bankruptcies that have been discharged show the company survived financial crisis and reorganized. This is less concerning than ongoing issues, but does suggest a history of financial instability.
A pending or current bankruptcy filing is a major red flag. Avoid extending new credit until the bankruptcy is resolved and their financial position stabilizes (typically 1-2 years post-discharge).
What should I do if the risk score is high? +
Immediate Actions:
1. Require prepayment or cash on delivery (COD)
2. Request personal guarantees from owners
3. Limit credit exposure to minimal amounts
4. Require deposits equal to 50%+ of monthly exposure
5. Get trade references and verify them
6. Run a full background/UCC search
7. Monitor payment performance closely
If they can't meet these terms, it may not be worth the risk. When collections become necessary, contact LegalCollects.ai.
How accurate is this assessment tool? +
This tool provides a data-driven estimate based on the information you provide. The accuracy depends on the quality and completeness of your input. The score is most reliable when you have verifiable information about payment history, financial metrics, and external signals.
For critical decisions (large credit exposure), supplement this score with credit bureau reports, trade references, financial statements, and legal searches. This tool is intended for initial risk screening, not as a sole basis for credit decisions.
Can I download or save my assessment results? +
You can print your results directly from your browser using the Print function (Ctrl+P or Cmd+P). The results page is formatted to print cleanly for record-keeping and client communications.
All scoring is done in your browser and data is not stored on our servers. We recommend taking a screenshot or printing your results for your records.
How does LegalCollects.ai help with accounts that go bad? +
If a vendor/customer with a high credit risk score doesn't pay, LegalCollects.ai specializes in B2B debt collection with attorney backing. We work on contingency, meaning you pay nothing unless we collect.
We handle: demand letters, negotiation, legal filing, court representation, and enforcement. Our approach combines firm collection practices with legal expertise to maximize recovery. We're particularly effective for California-based companies pursuing amounts over $5,000.
What personal information does this tool collect? +
This tool does not collect or store any of your input data. All calculations happen locally in your browser. We do not track individual assessments or store company information you enter.
If you choose to contact LegalCollects.ai or submit a collection case, that request will be subject to our Privacy Policy. Visit our Privacy Policy page for complete details.