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As a consumer, it’s always a good idea to understand your personal credit scores. Business owners, on the other hand, also need to focus on their business credit scores, such as the PAYDEX Score from Dun & Bradstreet (D&B). This business credit score measures your company’s track record of making on-time payments. If your business has a good PAYDEX Score, it could unlock the door to better business relationships to help your company thrive.
Here’s everything you need to know about the PAYDEX Score.
What Is a PAYDEX Score?
The PAYDEX Score is a business credit score that Dun & Bradstreet (D&B), a business credit bureau, generates. It measures how well your company pays its suppliers, vendors and other businesses it may work with. Scores range from 0 to 100, and a score of 0 represents the highest risk of a late payment.
How the PAYDEX Score Works
While you may have not had heard of the PAYDEX Score before, it’s one of the more simple business credit scores to understand. Compared to other types of credit scores, there’s not that much that goes into it, and it only measures one small piece about your business: how well it pays its suppliers and vendors.
How the PAYDEX Score Is Used
Here’s how different types of businesses you may work with use of your PAYDEX score:
- Landlords. Landlords may look at your business’s PAYDEX Score when deciding whether to let you lease a business location.
- Lenders. Lenders may also check your PAYDEX Score when deciding whether to approve you for a business loan or business credit card.
- Suppliers. Suppliers may check your business’s PAYDEX score to see whether they can expect invoices to be paid back on time and determine what terms to extend to you.
When a new business is looking to work with you, it’ll often check your PAYDEX Score as a part of its due diligence. Anyone or any business can access your PAYDEX Score on the D&B website.
How the PAYDEX Score Is Calculated
In order to generate a PAYDEX Score, you’ll need to apply for a DUNS Number on the D&B website. This is just like a Social Security number (SSN) for your business.
Once you have a DUNS Number, D&B can calculate your business’s PAYDEX Score based on payments that your suppliers report. Each supplier is called a tradeline and each individual payment you make is called an experience.
In order to generate a PAYDEX score, D&B will need at least three experiences from two tradelines. In other words, at least two of your suppliers will need to report at least three total payments to D&B before your business can generate its PAYDEX Score.
Some types of payments have a bigger impact than others. The earlier (or later) your payments are made, the more they’ll help (or hurt) your score. In addition, larger payments have more sway. If you pay off a $5,000 invoice early, it’ll have a more positive impact on your score than paying off a $500 invoice early.
PAYDEX Score Ranges
Unlike your personal credit score which ranges from 300-850, the PAYDEX score only ranges from 0-100. The higher, the better. Here are the different levels in that range.
It’s important to know that 80 is a significant number on this scale. If your PAYDEX score is 80, it means that you pay all of your supplier invoices off exactly on the day that they’re due, on average. A score above 80 means that on average, you pay off your invoices early. A score below 80 means that you pay your bills late on average, and the lower the score, the later the payment usually is.
For that reason, most businesses checking your PAYDEX Score will want to see a score of 80 or higher. This means that they’re more likely to be paid early or on time and won’t have to worry about chasing you down for late payments.
How to Check Your PAYDEX Score
You can check your current PAYDEX Score for free by signing up for D&B’s CreditSignal program, but there’s a catch: you’ll only get access to your PAYDEX Score for 14 days. After that, you’ll only receive updates when it changes. To check your PAYDEX Score after that 14-day period is up, you’ll need to buy a monthly subscription.
Alternatively, you can check your PAYDEX Score for free on other third-party sites, similar to how you check your personal credit score; However, there aren’t as many options for business credit scores. Nav is one popular site that offers free PAYDEX Scores.
How to Improve Your PAYDEX Score
There are two main ways to improve and build your PAYDEX Score:
- Make on-time payments. Aim to pay all of your suppliers on time, or early if you can. In fact, the earlier you make your payments, the more it’ll help your score, especially with large invoices.
- Report payments to D&B. You’ll also need to make sure that your suppliers report your payments to D&B. You can request your suppliers do this for you; However, this is the most challenging part of the equation because not all businesses do this or are required to do so.
If your suppliers don’t report your payments to D&B, you can pay for one of D&B’s monthly credit-building packages that allows you to proactively submit payment information to D&B, who will add it to your report if they can verify it. Keep in mind that this also means if they can’t verify it, it won’t show on your report, so it’s possible to pay and not receive any benefit.
You can do this with either D&B’s CreditBuilder Plus package ($149/month with the ability to submit up to 12 payments per year) or CreditBuilder Premium package ($199/month with unlimited payment submissions).