Paydex Scores

Good credit is the lifeline of your business and knowing your Paydex score may be one of the most important aspects. Your company’s score is the key to obtaining financing, setting lease payments, creating payment terms with suppliers, and even determining insurance premiums.

Paydex is a business scoring model developed by the financial reporting company, Dun and Bradstreet (D&B). The Paydex score is a dollar weighted average of how a company has paid its bills over the past year, based on the vendors that report to D&B. Simply put, Paydex scoring looks at one thing: whether a business makes payments on time and meets creditors’ payment terms.

It is important to keep in mind that while your Paydex score is crucial, lenders will often pull and weigh personal credit for the company’s principals as well.

It’s not impossible to attain business financing without a Paydex score, but the process won’t be as automated so it will take longer. It often entails the potential creditor calling listed credit references and waiting for their replies.

Paydex scores range from 1 to 100. A high Paydex score (much like a high FICO score) means a lower risk. Most lenders want to see that a company’s Paydex score is at least 65 - 70. Low Paydex scores will almost always lead to limited access to business credit as well as significantly higher interest rates.

A score of 100 represents a business that pays their bills prior to the invoices being sent. Businesses with a score of 80 are those that pay their bills precisely on time. To increase your score beyond 80, you must pay your bills ahead of time. Businesses must be vigilant in making payments to vendors and creditors within the terms of payment. However, keep in mind that you only receive ratings from those vendors that report to D&B.

The table below helps to illustrate the scores:

Paydex Score - Payment
100 - Anticipated early
90 - Payment within discount period
80 - Prompt Payment
70 - Payment if 14 days beyond terms
60 - Payment is 21 days beyond terms
50 - Payment is 30 days beyond terms
40 - Payment is 60 days beyond terms
30 - Payment is 90 days beyond terms
20 - Payment is 120 days beyond terms
UN - Unavailable

As with your personal credit, it is important to monitor your business’ score to watch for errors and avoid sloppy reporting by vendors. To check your Paydex score or for more information: visit the D&B website at www.dnb.com/us or contact them by phone at (877) 753-1444.

Brad Harmon is the President at a leading financing company, First Star Capital (http://www.firststarcapital.com/ ). Brad is a frequent contributor to online publications and newsletters, and is the author of this blog on commercial financing topics.