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.