July Blog – Difference between the H-Score® and TextScore®
This month’s blog addresses another frequently asked question about the main difference between the Company Watch H-Score® and TextScore® and looks at our new Combined Score.
The H-Score® is the overall measure of the company’s financial health derived using a detailed statistical analysis of numbers contained in a company’s published accounts. It compares the financial characteristics of the accounts of thousands of companies that went on to fail versus those that remained healthy.
Instead of using financial numbers to predict distress or corporate insolvencies of a company, the TextScore uses machine learning techniques to identify patterns of words/phrases a company has used in its published accounts that can be indicative of financial distress. To develop this, we looked at the text accompanying companies that went on to fail versus those that continued in good financial health. This is the only credit score on the market that takes this innovative approach.
Both the H-Score® and TextScore® range from 0 (weakest) to 100 (strongest) and companies with a score of 25 or less are in the Warning Area – such companies may be vulnerable and should be viewed with care.
The resulting Combined Score of the H-Score® and TextScore® is more accurate at predicting financial distress than the H-Score® or the TextScore® alone, as it combines the two different distinct evaluations of a company’s financial report.