This week I was in Manhattan Beach, California attending a Credit Research Foundation (CRF) Credit and Accounts Receivable Open Forum and an interesting debate broke out during the first day’s agenda: does predictive credit scoring still work? Can it be relied on given the current crisis?

In some ways, this was a surprising debate given that CRF members have been strong proponents of the use of scoring for commercial accounts. On the other hand it shouldn’t be that surprising given that we’ve seen serious debate and blame for some of the current mortgage mess on the use of consumer scoring models and that as leaders in the industry, the CRF members have been quick to recognize changes and adapt. A wide variety of vendors offer credit reports with predictive scores as well as custom models-these products have been a staple of our industry for years. The first two presentations of the conference focused on the state of the global credit crunch and set the stage for a group discussion with the two highly qualified guest speakers. With roughly 200 credit professionals in the conference room representing predominantly larger US organizations the group was eager to share. Both speakers did an excellent job of covering how we arrived in the current crises, what to expect going forward and offered opinions on whether the various stimulus efforts and bailouts would turn around the recession (and when). The host of the open forum then turned to the audience for questions and posed a simple question to get things started: how are you as commercial credit and collections professionals handling the credit crunch?

The first credit manager answered (roughly paraphrasing): “we are scoring every account to make sure we understand their risk going forward”. That’s when the panelists jumped in on scoring. Both heavily questioned the validity of the large debt rating agencies, the consumer FICO score and other predictive models (business or consumer) given the current economic cycle. The debate continued as various practitioners from the audience offered their opinions, as every vendor of the above-mentioned scoring solutions began to squirm in their seat. The group was split and many landed on both sides of the debate.

The debate: do commercial credit scores still predict the future?

It’s a fair question – given the rapid changes in our economy over the past year, can a statistically validated credit or collections score truly predict the future? Can a model based on the last 18 or more months of payment history still predict what is going to happen in the next 6 to 12 months or has the economy moved past the tolerances of the model? This is 2009; nothing seems to be predictable as even the best customers are turning delinquent and current models are suspect at best. Some may argue that by continuing to rely on these models that you are only digging a bigger hole for yourself with a false sense of security.

So, should we stop using scoring? Simply put, no. But there is no “one-sized, fit-all” answer here and I expect a heavy amount of debate in the coming months.

We look forward to your comments below.