What is Paydex Score?

According to Dun & Bradstreet (D&B), the Paydex score is

D&B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on trade experiences reported to D&B by various vendors“.

The Paydex Score ranges from 0 to 100, with 90-100 as excellent scores; 80 and below as good; and 70 and below as bad scores. For obvious reason, higher scores indicate better payment performance.

Paydex isn’t FICO score but are similar in a way that both are used to determine whether you’ll get a credit and on what terms. Paydex is essentially the business equivalent of your personal credit score.

While individual credit score take a number of factors into consideration, Paydex is calculated based one single factor – whether a business makes prompt payments to its suppliers and creditors within the agreed upon terms of payment.

According to the Paydex Chart, a score of 80 and above is considered favorable – that is they pay on time. Today most lenders and suppliers are looking for a score of 70 and higher. As a business owner, it is up to you to ensure that you reach a score of at least 80 and above to enjoy good standing.

How to Improve Your Paydex Score?

There are ways to improve your score but firstly, build your Paydex score at least three to six months prior to your getting a loan. What you can do is to apply for a D-U-N-S® number – a nine-digit business identification number. D-U-N-S® number enables potential customers, suppliers and lenders to easily verify your credit worthiness make it easier for them to do business with you and and use it to establish a small line of credit with a company that automatically reports to D&B.

One of the best ways to raise your Paydex score is to frequently pay all of your bills early whenever possible. For instance, to raise your score beyond 80, you must pay ahead of time since your score is directly related to how you pay your bills.

For example, a paydex score of 81 tells the prospective suppliers (or lenders) that you’re always paying 2 days sooner than the terms. In other words, if your creditor gives you 30 days to pay, make an effort to pay 10 days in advance. Such practice will push your score above 85.

Yet another effective strategy to raise your score is to apply for a secured business credit card to pay for small business expenses. What’s more important here is the practice of paying your credit card balances ahead of time – consistently. By doing so, you can improve your score in just a few months.

Find a credit card that would report your payments to the major business credit bureaus. This is one of the most effective ways to build your business credit report.

Equifax Small Business

While Dun & Bradstreet has been the primary company used to evaluate business credit for many years, there are several other companies that have begun to provide similar credit evaluation services to small businesses based on their independent databases. One of them is Equifax Small Business.

Equifax, one of the three major consumer credit rating bureaus, is now providing business credit evaluations for over 22,000,000 small businesses and corporations to detect early signs of trouble by monitoring key customers, suppliers & partners.

In order to predict the likelihood that a new or existing small business will experience significant delinquency or file bankruptcy in the next twelve months, Equifax allows you the ability to easily check any U.S. Business’s Credit Score or subscribe to Equifax Business Credit Monitoring services on businesses in the United States.

Equifax Small Business Credit Report

Small businesses need to have accurate and reliable information on a daily basis, and this not only pertains to their business, but also to their credit information. In today’s challenging economy, it is very important for a business owner to be able to determine the creditworthiness of a business partner, clients and even their own company. Equifax is one of the options.

Equifax has made it easy for small business owners, as well as other businesses searching for information on a business, to get the reports right on the internet so they can make sure they know who they’re doing business with and help lower their risks when they take on new clients or suppliers.

Equifax Small Business divsion offers several different types of credit reporting and credit monitoring for your business, all of which are available for purchase online.

Equifax Business Report Price Description
Business Monitoring and Alerts $19.95 / month Monitor your major business customers and key partners to help protect yourself from losses.
Business Credit Report $49.95 / month Screen potential clients and suppliers for signs of delinquency.
Multi-Pack Business Credit Report $199.95 / month 5 reports for the price of 4. Huge savings if you check several companies at a time.

Single Business Credit Report

Before you sign a contract with a key partner (or supplier) or ship that big customer order, it will be a good idea to first make sure you know who you’re doing business with.

Equifax small business credit report can help you decide if you should allow a new customer to open an account, use credit to make a purchase or borrow money from you.

You may also want to order a credit report from Equifax for your own business, so you can monitor your own business credit score and dispute any errors, if any.

Business Monitoring and Alerts

For $19.95 a month, you can monitor and track your most important business business customers and key partners. This service reviews a company’s credit report and sends out an e-mail alert when there are significant changes in a company’s rating.

The service also helps businesses monitor their own credit scores to better manage their commercial credit standing.

Summary

As a small business owner, there is nothing like piece of mind knowing ahead of time that you are working with a reputable business. It is therefore extremely important that you check the creditworthiness of any business you are thinking of doing business with. This will potentially save your business thousands of dollars in the long run!

And in this tight credit market, knowing what’s in your business credit report and understanding what has been reported about your business by lenders, suppliers and service providers ensures no surprises when you apply for a business loan.

Whether you’re thinking of applying for a loan or screening potential customers and suppliers, Equifax business credit report offers up-to-date and detailed information you need to make an important credit decision. Overall, it’s simple to obtain, easy to use and interpret.

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