One of your most important goals as a business owner is to achieve a good business credit score. A good business credit score demonstrates your financial responsibility and reliability, which can instill confidence in lenders, clients, business partners, and potential investors.
The PAYDEX® score, developed by Dun & Bradstreet®, is a vital component of your company's financial health. It reflects your creditworthiness based on your payment history. This Huddle Business Capital blog article has the information you need to know about the PAYDEX business credit score.
How the PAYDEX score is calculated.
Understanding how the PAYDEX score is calculated is crucial for business owners like yourself. This proprietary scoring system from Dun & Bradstreet, ranging from 0 to 100, is primarily based on your company's payment history to suppliers and vendors. The more promptly you pay your bills, the higher your score will be. Conversely, late payments and bills sent to collections can lower your score.
What is a good PAYDEX score?
As mentioned above, the PAYDEX score ranges from 0 to 100. It is commonly agreed that businesses should strive to achieve and maintain a score of 80 or higher. Scores from 80 to 100 are considered good (or very good); they indicate that a company pays its bill on time and presents little to no risk to lenders, creditors, and insurers. A company with a PAYDEX score of 100 has a perfect payment history and has always paid its bills and debts before the due date.
What are low and medium scores?
PAYDEX scores from 1 to 49 are considered low. Companies with scores in this range have a history of late payments, typically 90 to 120 days or longer. They may also have one or more delinquent accounts sent to collections. PAYDEX scores from 50 to 79 are considered medium. Companies with medium scores typically make payments up to 30 days late.
Why your PAYDEX score matters.
Your PAYDEX score is more than just a number; it's a key that can unlock a world of business opportunities. A good PAYDEX score can significantly impact your ability to obtain small business loans, funding to lease or finance equipment, and other financing solutions with larger limits, lower interest rates, and more favorable terms. Additionally, your vendors and suppliers are more inclined to offer flexible payment terms if your company has a good PAYDEX score.
How to check your company's score.
Are you curious to see what your PAYDEX score is? You can visit the Dun & Bradstreet website and sign up for their CreditBuilder™ program, which requires a monthly fee to view your Dun & Bradstreet business credit scores and ratings. Please note that if you don't already have a D-U-N-S number, you must apply for one on the Dun & Bradstreet website.
Strategies to improve your PAYDEX score.
By implementing the following strategies, you'll be well on your way to improving your PAYDEX score.
Prioritize timely payments. The most effective way to improve your score is to consistently pay your vendors and creditors on or before the due date. If possible, set up automatic payments or reminders to ensure you never miss a deadline.
Diversify your credit mix. Maintain various credit types, including revolving credit lines and short-term business loans. This shows your ability to manage different financial obligations to lenders and vendors.
Establish trade references. Partner with suppliers who report to Dun & Bradstreet. These positive trade references can significantly impact your PAYDEX score.
Implement effective debt management. Keep your company's overall debt levels in check and maintain a low credit utilization ratio. This shows you're using credit responsibly and not overextending your business financially.
Request credit limit increases. Ask your existing creditors for higher credit limits as your business grows. This can improve your credit utilization ratio, positively affecting your score.
Regularly check your business credit report. By staying informed about your credit standing, you can quickly identify and address any errors, discrepancies, or fraudulent activity in your credit report that could hurt your credit score.
Disclaimer.
Huddle Business Capital is not affiliated with nor endorses Dun & Bradstreet. PAYDEX is a registered trademark of Dun & Bradstreet. This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind.
