You know that your 3-digit FICO personal credit score can affect your ability to get a small business loan to start your business. Once you’re up and running, your Paydex score can influence your ability to get additional lending, as well as affect potential vendor relationships and what rates you get for office space and insurance.
Wondering, “What is Paydex?” It’s a business credit score provided by commercial data and analytics firm Dun and Bradstreet. The Dun and Bradstreet Paydex score reflects the on-time (and early and late) payment history of a business. Lenders and vendors may use a business Paydex score to determine:
- Whether or not they want to lend to or work with a business
- Interest rates for lending
- Payment terms
Even if you don’t need funding, office space or insurance now, you may in the future. By being aware of where you fall in the Paydex score range, you can work to increase your score if you need to.
What Is a Good Paydex Score?
The answer to what is a good Paydex score is different than a personal credit score rating. Whereas a FICO score falls in a range of 300-850, a Paydex score range falls between 1-100.
The higher you are on the Paydex score range, the better your score is. You should aim to have a Paydex score of at least 80, and we’ll explain why below.
What Is the Paydex Rating?
To get a Paydex score, your business must apply for a D-U-N-S Number. That establishes your business with Dun and Bradstreet, so you can become eligible for a Paydex score.
To get a Paydex score, you must have at least 4 “trade references” to base it off. These are payments you have made to your lenders, suppliers or vendors, where there was a payment schedule in place. That way, Dun and Bradstreet can confirm whether each payment was made early, on time or late.
Dun and Bradstreet will factor trade references from up to 875 individual business partners to determine a Paydex score. Trade references dating back up to 2 years will be considered, though your entire transaction history will remain on your Dun and Bradstreet file.
The Paydex score is dollar-weighted, which means the higher the transaction’s dollar amount, the more it impacts a score. If you’re paying off a smaller bill early, it won’t mean as much to your score compared to if you’re paying off a larger bill late.
Where Should My Business Fall in the Paydex Score Range?
To be considered a low-risk business in relation to your Paydex score, you want to be in the 80-100 range. A score of 50-79 indicates a moderate risk of late payment, and a score of 1-49 indicates a high risk.
Don’t fret if you aim high but don’t get above an 80 score. A score of 80 means you pay bills on time. You can only get a higher score by paying earlier than your terms. If you pay 20 days sooner, you can achieve a score of 90, and if you pay 30 days sooner, you can climb to 100.
Conversely, the longer it takes you to pay your bills, the lower your score can tumble. A score of 70 indicates payments 15 days beyond terms, while a score of 30 indicates payments 90 days beyond terms.
Do I Really Need a Paydex Score?
If you want to expand your business and will need a loan, or you want to work with high-quality suppliers and vendors, you should have a solid Paydex score. Reputable lenders, suppliers and vendors will often look to a Paydex score to determine how reliable you will be. Even business partners you want to work with may want to examine your Paydex score before they agree to terms.
Other business entities may also reference your Paydex score before providing their services. For example, if you want to rent an office building or shop, a landlord may reference your Paydex score. Or if you need business insurance, the insurer may look at your Paydex score.
Your Paydex score does more than affect the likelihood of working with great partners. A good one can also get you better terms, higher loan amounts and lower interest rates. You can also use your Paydex score when you’re negotiating terms to validate your trustworthiness.
How Can I Find My Paydex Score?
To find your Paydex score, you’ll need to purchase a business credit report from Dun and Bradstreet. Dun and Bradstreet will provide free alerts to changes in your Paydex score, so you don’t have to purchase a new report unless something has changed.
You can also purchase your competitors’ reports to see how you stack up. Other people can purchase your business credit report, as well, which is another reason why you should care about your Paydex score.
How Can I Improve My Paydex Score?
If your current Paydex score is less than stellar, you can take some steps toward improving it. Here’s how.
Pay More Bills Earlier
You should always aim to pay all your business bills on time, but if you can pay a few earlier, even better.
Open Up Tradeline Business Accounts
Open up tradeline business accounts with your suppliers and vendors, so you’re establishing set payment terms that can positively affect your Paydex score when you make payments on time.
Don’t Mix Personal and Business Credit
One reason why it’s vital to separate personal and business finances is because late payments you make on a business account that are reported to Dun and Bradstreet will affect your Paydex score. Even if it’s a personal purchase that you’re late on, if it’s on a reported business account, it will count against you.
Ask Your Suppliers to Report to Dun and Bradstreet
Dun and Bradstreet must receive vendor reports of payments to calculate your Paydex score. There may be a chance that some vendors you’re making on-time or early payments to are not reporting. Talk with all your partners, especially those you do the highest dollar transactions with and work most frequently with, and ask them to report.
Get a Score, Even If You’re Starting Small
If your small business is still at the point where you’re not using lots of vendors or suppliers, you can still get a Paydex score. Look at those you’ve been invoiced by with set payment terms, such as accountants, lawyers and landlords. Making on-time payments to individuals like these can still help you establish a Paydex score so your business can continue to grow.
It’s also important to set up realistic payment terms with new partners. You may want to set up longer terms if possible, so you can make more early payments that can bump up your Paydex score.
Sign up for the free Paydex score change alerts. If you see something that’s inaccurate, make sure to dispute it with Dun and Bradstreet.
Make Your Paydex Score a Priority for Your Business
Paying your business bills on time is good business practice. It increases the trust your vendors and suppliers have in you and helps you grow those relationships.
Get additional benefits by ensuring those suppliers and vendors are reporting your positive payments, so your Paydex score can get a boost, too. Just like you might regularly check in on your personal credit score to make sure it’s going strong, maintaining a solid Paydex score can enhance your business reputation with new potential partners.