As anyone who has ever tried to borrow money knows, credit scores and advanced KPIs are very important. A credit score is a value that lenders use to decide how likely you are to repay your debts on time and in full. A high score means you're a low-risk borrower, so you'll likely get approved for loans at favorable interest rates. A low score means you're a high-risk borrower, which could lead to being denied loans or paying higher interest rates.
Your credit score is a number used to represent your creditworthiness. It's calculated using information from your credit report, so the higher your score, the better you look to lenders.
There are a few different ways to calculate a credit score, and most models use a variation of the following factors:
- Payment history: This includes how often you've paid bills on time and any late payments or defaults.
- Amounts owed: This looks at how much debt you have compared with your available credit limit and includes collection accounts and bankruptcies.
- Length of credit history: The longer your track record of borrowing money and repaying it, the better this is when determining your score.
- New credit/applications: How many new lines of credit you've applied for
There is no one-size-fits-all answer to this question, as the use of advanced Key Performance Indicators (KPIs) will depend on the specific needs of your business. However, are few examples are given below.
Businesses can benefit from measuring and tracking the Customer Lifetime Value (CLV). The CLV takes into account current sales or revenues generated by a customer and future profits that could potentially be earned from that customer over time. This information can help businesses make smarter decisions about which customers to focus marketing efforts on.
Churn rate is another important KPI that can provide valuable insights into the health of your business. The churn rate measures how many customers leave or "churn" from your company each month or year; understanding what causes churn and fixing these issues can increase your organization's profitability.