What is a Paydex score?
Key takeaways
- A Paydex score, which ranges from 0 to 100, assesses a business’s financial health for vendors, lenders and insurers.
- The Paydex scoring model is based on dollar-weighted trade references, emphasizing the impact of larger payments.
- Timely payments can improve your Paydex score; a score above 80 is considered to be low risk.
- A low score can complicate a business’s access to financing and insurance, while timely payments and positive trade references can help improve it.
If you own a business, you may have heard about Paydex scores. But if you want financing from a financial institution or plan to work with vendors and service providers, your Paydex score is a crucial piece of the puzzle. It demonstrates your business’s financial health to potential creditors or lenders and indicates your ability to pay your bills on time. Here’s what to know about your Paydex score — and why it matters for your business.
What is a Paydex score — and how can it help your business?
A Paydex score is a business credit score, similar to your own personal credit score. Issued by Dun & Bradstreet, your Paydex score represents how likely it is that your business will pay its vendors and suppliers on time. While your personal credit score ranges from 0 to 850, your business’s Paydex score ranges from 0 to 100.
In general, a higher Paydex score indicates that you are more likely to pay bills on time or in advance. Keeping your score above 80 signals that your business is a low risk for creditors, vendors and insurers.
Vendors, suppliers, landlords and lenders can all access your business’s Paydex score if they purchase your company’s report through Dun & Bradstreet. The results of your report can influence your business:
- Loan approvals
- Insurance premiums
- Creditworthiness
- Business partnerships
- Vendor selection
What factors impact your Paydex score?
Unlike your personal credit score, which is based on your ability to manage credit, your business Paydex score depends solely on what Dun & Bradstreet calls your trade references.
Trade references are your payment experiences with vendors and suppliers that are registered with Dun & Bradstreet by the vendors and suppliers themselves. Note that Dun & Bradstreet considers credit card payments to be trade references.
Dun & Bradstreet recommends you have a minimum of three trade references on record from two unique suppliers for it to accurately calculate your Paydex score. Only transactions from the previous two years are used when determining your business score.
Larger credit matters more
The Paydex score is a dollar-weighted measurement. This means the size of payments made or owed to vendors and suppliers is an important factor, 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.
How to improve your Paydex score
The best way to improve your score is to make timely payments to your vendors and creditors. Negotiating longer terms with these companies can be helpful, making it easier to make payments on time or early.
For example, if you only have a 10-day window to make a payment, you may bump into issues if finances get tight, resulting in a late payment and a negative experience on your record.
You can also ask your suppliers and vendors to report their experience with you to Dun & Bradstreet. Dun & Bradstreet can’t assign a business credit score based on unreported experiences, so your creditors and suppliers must share this information when possible.
Consistently monitoring your Paydex score can help you improve it. Dun & Bradstreet offers various monitoring tools to help you stay on top of Paydex score changes so that you can quickly address any issues that arise.
How is a Paydex score used?
Your business’s Paydex score is used by a variety of people and organizations to help them decide whether they want to work with you:
- Financial institutions use your score to determine whether to lend you money and what terms to offer.
- Insurance companies use your score to decide on premium amounts for your business.
- Landlords may check your score when deciding whether to accept you as a tenant.
- Suppliers and vendors may look at your score before agreeing to engage with your 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.
| Paydex score range | Risk level | Business payment |
|---|---|---|
| 80 to 100 | Low risk | Within 30 days before due date |
| 50 to 79 | Medium risk | 2 to 30 days after due date |
| 0 to 49 | High risk | 31 to 120 days after due date |
Remember that you don’t need a flawless score to get the best rates and strong terms. That would mean you pay all your bills 30 days in advance — which few businesses can do. As long as your business shows vendors and creditors that you can pay your bills on time from the start, then a score of 80 should be attainable.
The bottom line
If you want to run a successful business, you need to monitor your Paydex score. This score influences everything from your ability to secure financing to qualifying for the best 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 with your vendors and suppliers, encouraging your trade references to report to Dun & Bradstreet and monitoring your Paydex score can all help move the needle in the right direction.
If your business requires short-term financing, see our roundup of the best small-business cards to help you start or grow your business.
