Table of Contents
- Paydex scores are issued by Dun & Bradstreet and indicate your business’s history of paying creditors early, on time, or late
- Vendors, landlords, and many other business partners that extend credit or rely on regular payments may check your business’s Paydex score
- A score of 80 or higher is considered strong, as it indicates your business always pays on time or early.
- To establish your Paydex score initially, you’ll need a DUNS number and at least two trade lines reporting a total of at least three payments
Many consumers are familiar with their credit scores and what they mean for their ability to borrow money. However, not all business owners realize the importance of a similar metric for their business credit: the Paydex score.
Although the details of the Paydex score differ from your personal credit score, its purpose is similar. The Paydex score shows potential creditors how reliable (or unreliable) your business is at handling its debts. As a company grows, this business credit score is essential for maintaining financial relationships and critical business partnerships.
Here’s how a Paydex score works, why it is relevant for your business, and what you can do to influence it.
Paydex Score: What It Is And Why It Matters
The Paydex score is a metric released by Dun & Bradstreet (D&B), a major business credit bureau. It tallies your business’s payment history with any vendors, suppliers, or other creditors that report it to D&B and converts this to a score designed to demonstrate your payment reliability to new potential third parties that may rely on payments from your business.
Unlike your personal score, which ranges from 0–850, your business’s Paydex score is on a scale of 0 to 100. In this system, a score of 80 indicates that you tend to pay your bills right on time. The closer you get to 100, the earlier you tend to pay, while the closer you get to 0, the later you tend to pay.
Why Your Paydex Score Matters
When you launch your business, you may be able to rely on your personal credit to open a business credit card and bank account and establish initial vendor relationships. However, as your business grows, vendors and suppliers will increasingly expect to see how your business operates outside your personal credit history. Vendors want to know how your business handles its payments and outstanding debts, not how you personally handle your financial obligations.
This makes your Paydex score crucial for establishing new relationships with vendors and other business partners as you scale your business operations. Suppliers may consider your score when deciding how much credit to extend or the length of your regular payment terms, for instance. Your Paydex score could even impact your ability to secure property or equipment for your business.
Establishing a business credit profile also helps you separate your business and personal finances, which is a key step toward protecting yourself if your business runs into financial trouble.
What Factors Affect Your Paydex Score?
Although Paydex scores serve a similar purpose to personal credit scores, the factors that shape them are much simpler. While your personal score is based on several aspects of your borrowing history, your business’s Paydex score comes down to one thing: your payment history with vendors, suppliers, landlords, and other business creditors.
D&B uses a weighted scale to calculate your score based on when your business pays its bills compared to when they’re due. Your vendors, known as tradelines on your D&B history, report individual “payment experiences” to D&B, and the D&B database contains a history of your past payments, delinquencies, and accounts that have gone to collections.
When it comes to credit impact, larger, more recent payments carry greater weight. In other words, a $250 late payment from a year ago will affect your score much less than a $2,500 late payment from last month.
How To Establish And Improve A Paydex Score
If you want to set up and build your business’s Paydex score, you should take a few key steps:
- Get a DUNS number. The Data Universal Numbering System is your business’s nine-digit identifying number with D&B. This will be used to track your payment history and allow vendors to check your score.
- Encourage suppliers to report your payment history. You’ll need at least two suppliers to report three total payments to establish your initial score.
- Pay on time and early as much as possible. Vendors want to see that your score is 80 or higher, and you’ll need to pay on time or early most of the time to achieve that score.
- Negotiate payment terms with suppliers. Longer payment terms make it easier to pay on time or early, so see if some of your vendors can extend more generous terms.
How to Track Your Paydex Score
There aren’t as many options for monitoring your business credit profile as there are for tracking your personal credit profile. However, some third-party sites like Nav offer free scores when you sign up for their business credit card.
You can also sign up for PayDex’s Credit Signal program, which offers 14 days of free business credit monitoring. After 14 days, you’ll continue to receive alerts if anything changes with your PayDex score.
Put Your Paydex Score To Work For You
Paydex scores tell an important story about your business’s debt management practices. It’s a story vendors and other business partners will watch closely. When your most important suppliers see you as a low-risk business partner, it opens the door for you to scale your business and achieve greater success.
Ultimately, it’s wise to start building your Paydex score from the moment you open your doors. By paying your bills on time or even early and ensuring you have an active D&B account, you can work toward an excellent Paydex score.
Frequently Asked Questions (FAQs)
What’s The Difference Between Business And Personal Credit Scores?
Personal credit scores measure your personal history of managing debt and are based on your personal credit cards, home mortgages, auto loans, and other personal debts, bankruptcies, and delinquencies. Your business credit score is based on your business’s history of paying bills early, on time, or late. Although your personal credit score can impact your financial prospects as a business owner, your business score is much more important as your company grows.
How Long Does It Take To Get A Paydex Score?
After you receive a DUNS number, the time it takes to get your first Paydex score depends on your vendors. You’ll need at least two vendors to report three total payment experiences before you receive your first score.
What Is A Good Paydex Score?
A Paydex score of 80 or higher indicates that you almost always pay your bills on time or early, and this vastly improves your chances of securing good credit with lenders and vendors.
Where Can I Get A Paydex Score For Free?
D&B offers free Paydex scores for 14 days with its Credit Signal program, and some third-party companies like Nav offer free Paydex scores with a business credit card.
How Do I Report Payments For My Paydex Score?
To self-report information about your business’s tradelines and payments, you’ll need access to D&B’s Credit Builder tool. The company offers several tiers for this service, each of which includes a certain number of trade references for verification.
Find out more
- Explore the 5 Cs of Credit – Discover the five critical factors that shape your creditworthiness.
- Best Credit Repair Companies – Find top services to help repair your credit.
- Credit Score Monitoring Services – Monitor your credit score effectively with these services.
- Can Landlords Affect Your Credit Score? – Learn how your rental history might impact your credit.
- Cheapest Credit Repair Services – Repair your credit without breaking the bank.
- Understanding Credit Repair Cost – Get insights into the costs of credit repair.
- FICO vs VantageScore – Understand the differences between these credit-scoring models.
- Build Credit Fast – Quick tips to improve your credit score rapidly.