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If you own a business, you may have heard of something called a Paydex score. But what is a Paydex score, and why does it matter for your business? If you want to get financing from a financial institution or plan on working with vendors and service providers, a Paydex score is a crucial piece of the puzzle. It indicates your financial health and is a good indicator of your reliability.
What is a Paydex score?
A Paydex score is a business credit score, similar to your own personal credit score. It is issued by Dun and Bradstreet and represents how likely it is that your business will pay vendors and suppliers on time. While your personal credit score ranges from 0 to 850, your Paydex score is between 0 and 100.
A higher Paydex score indicates you are more likely to pay bills on time or even in advance. If your score is above 80, it means that, based on your payment history, you are considered to be low risk.
What factors impact your Paydex score?
Unlike your personal credit score, which is based on a variety of factors, your business Paydex score is dependent solely on your Trade References.
Trade References are your payment experiences with vendors and suppliers that are registered with Dun and Bradstreet by the vendors and suppliers themselves. It’s important to note that Dun and Bradstreet does not consider credit card payments to be Trade References.
To properly calculate your Paydex score, Dun and Bradstreet recommends you have a minimum of four Trade References on record. Only transactions from the previous two years are used when determining your business score.
Recent, larger credit matters more
Since the Paydex score reflects the current likelihood of your business making payments on time, recent Trade References carry more weight than older ones.
The size of payments made or owed to vendors and suppliers is an important factor as well, with larger payments having a greater impact than smaller ones. For example, being late on a $5,000 payment will have a much greater effect on your Paydex score than being late on a $300 payment.
Improving your Paydex score
The primary way to improve your score is to make payments in a timely manner. Negotiating longer terms with vendors and suppliers can be very helpful, as it makes it easier for you to make payments on time or early. For example, if you only have a 10-day window to make a payment, you may have issues if finances get tight, resulting in a late payment and a negative experience on your record.
How is Paydex score used?
The Paydex score is used by a variety of people and organizations to help them decide whether they want to work with your business. Financial institutions will use your score to determine whether to lend you money and what terms to give you.
Insurance companies examine your score when deciding premium amounts for your business. Landlords may check your score when deciding whether to accept you as a tenant. And, of course, suppliers and vendors will look at your score before agreeing to engage with your business.
With these things in mind, it is in the best interest of your business to keep your Paydex score as high as possible. A low score can hamper your growth and make it difficult for you to do business.
What do different Paydex scores mean?
The lower a business Paydex score, the higher the risk of late payment it represents to a lender.
- 80-100: Low risk
- 50-79: Medium risk
- 0-49: High risk
The following table shows you what each Paydex score means in terms of your payment history. Keep in mind, you don’t need to have an absolutely flawless score. That would mean you pay all your bills 30 days in advance, which few, if any, businesses can actually do. As long as you keep your score at 80 or above, it shows vendors and suppliers that you pay your bills on time.
|Paydex Score||Average days to make payment||Paydex score||Average days to make payment|
|100||30 days early||59||23 days late|
|99||29 days early||58||24 days late|
|98||28 days early||57||25 days late|
|97||27 days early||56||26 days late|
|96||26 days early||55||26 days late|
|95||25 days early||54||27 days late|
|94||24 days early||53||28 days late|
|93||23 days early||52||29 days late|
|92||22 days early||51||29 days late|
|91||21 days early||50||30 days late|
|90||20 days early||49||33 days late|
|89||18 days early||48||36 days late|
|88||16 days early||47||39 days late|
|87||14 days early||46||42 days late|
|86||12 days early||45||45 days late|
|85||10 days early||44||48 days late|
|84||8 days early||43||51 days late|
|83||6 days early||42||54 days late|
|82||4 days early||41||57 days late|
|81||2 days early||40||60 days late|
|80||Pays on time||39||63 days late|
|79||2 days late||38||66 days late|
|78||3 days late||37||69 days late|
|77||5 days late||36||72 days late|
|76||6 days late||35||75 days late|
|75||8 days late||34||78 days late|
|74||9 days late||33||81 days late|
|73||11 days late||32||84 days late|
|72||12 days late||31||87 days late|
|71||14 days late||30||90 days late|
|70||15 days late||29||93 days late|
|69||16 days late||28||96 days late|
|68||17 days late||27||99 days late|
|67||18 days late||26||102 days late|
|66||19 days late||25||105 days late|
|65||19 days late||24||108 days late|
|64||19 days late||23||111 days late|
|63||20 days late||22||114 days late|
|62||21 days late||21||117 days late|
|61||22 days late||20||120 days late|
|60||22 days late||1 – 19||Over 120 days late|
The bottom line
If you want to run a successful business, you need to keep tabs on your Paydex score. It influences everything from securing financing to obtaining supplies to insurance rates.
The good news is that if your business credit score is lower than you’d like, you can work to raise it. Making payments on time or early, especially on your business credit card, will move the needle in the right direction.