PAYDEX Scores: What To Know
As a business owner, you’ll need to focus on building your business credit scores, including the PAYDEX score from Dun & Bradstreet. Like a personal credit score, your PAYDEX score measures your business’s record of on-time payments and serves as an indicator of your creditworthiness.
- Dun & Bradstreet’s PAYDEX score is a numerical representation of your business payment history. A strong PAYDEX score tells potential vendors and lenders that your business makes timely payments, frequently paying bills on time or early.
- PAYDEX scores range from 1 to 100, with scores of 80 or higher indicating a low risk of late payments.
- You can potentially improve your PAYDEX score by paying your bills before they are due, but vendors and suppliers aren’t required to report your payments to D&B. In some cases, you may need to send payment information to the credit bureau yourself — but there’s no guarantee that self-reported activity will be accepted.
What is a PAYDEX score?
A PAYDEX score is a business credit score reported by the firm Dun & Bradstreet (D&B), tracking how likely a business is to pay vendors and suppliers on time. PAYDEX scores range from 1 to 100, with higher numbers indicating a lower risk of late payment.
Unlike personal credit scores, PAYDEX scores only factor in the timeliness of payments made to vendors and suppliers within the last 24 months, with a greater emphasis on larger payments.
To get a PAYDEX score, businesses must have a DUNS number. This number is a form of identification that can be used by lenders and other companies to find and report business information. If your business doesn’t have a DUNS number, you can request one online for free.
What is a good PAYDEX score?
PAYDEX’s scores range from 1 to 100, with scores from zero to 49 indicating that a business frequently makes payments 60 days or more after the agreed upon date. A score of 100 indicates that the business consistently makes payments 30 days or more before the due date.
A PAYDEX score of 80 or higher is considered a good score, indicating a history of making payments on time or early. Here’s a detailed breakdown of PAYDEX scores and what they mean:
| Score | Definition |
|---|---|
| 0-49 | High risk of late or missing payments |
| 50-79 | Moderate risk of late or missing payments |
| 80-100 | Low risk of late or missing payments |
How is a PAYDEX score calculated?
PAYDEX scores are calculated based on a business’s payments to suppliers and vendors on a rolling basis. Each vendor or supplier is considered a trade reference, and each payment is recorded as a trade experience. D&B requires at least two suppliers to report at least three trade experiences each to calculate a business’s PAYDEX score.
However, it’s important to note that each trade reference must provide its details to D&B for that trade to be factored into the PAYDEX score, and some vendors may not report payment activity to D&B.
If your suppliers don’t report to the credit bureaus, you have the option to manually add payment information to your D&B file. But this would require a paid subscription, which costs $149 per month, and there’s no guarantee that self-reported activity will appear on your credit report.
Not all trade experiences have the same impact on a business’s PAYDEX score. Transactions are dollar weighted, meaning that a greater emphasis is placed on transactions with a higher dollar amount — a $100,000 invoice would be more impactful than a $1,000 invoice, for example.
More emphasis is also placed on recent trades. This means that a late payment on a substantial transaction within the last month would hypothetically matter more than a small, on-time payment from several months ago.
How is a PAYDEX score used?
Here’s who would use your PAYDEX score and why:
- Landlords: Before entering into a lease agreement, commercial real estate landlords may check your PAYDEX score to determine if your business is at risk of delinquent rent payments.
- Insurance companies: Insurance companies that offer business insurance may use your PAYDEX score to assess risk and set premiums.
- Lenders: When determining whether to approve a business for a small business loan or even a credit card, lenders may check your business’s PAYDEX score, which can also help set terms and interest rates.
- Suppliers: Before a vendor agrees to work with your business, they’ll want to make sure you have a strong record of making payments by their due dates. Lower PAYDEX scores could require prepaid or cash-on-delivery arrangements.
- Customers: Though a PAYDEX score won’t have a direct impact on the relationship between your business and its customers, anyone can pay to check your score, which means your customers could potentially use this score to see if your business has a record of making late payments on its financial obligations.
A low PAYDEX score indicates the business typically doesn’t make payments according to the agreed upon terms.
Bad PAYDEX scores can be a red flag for other businesses you may want to partner with, as late payments can directly impact their cash flow management. Businesses with a bad PAYDEX score may also struggle to acquire loans, sign top vendors or secure commercial real estate rentals on their desired terms.
How to check your PAYDEX score
To check your PAYDEX score, you’ll need to purchase a copy of your credit report through D&B. A subscription to D&B’s Credit Insights Basic plan costs $49 per month and allows you to view multiple credit scores, including your PAYDEX Score.
The company also offers a Plus subscription for $149 per month that allows you to review all of your Dun & Bradstreet ratings. This is the same subscription you would need to report your own payment experiences directly to D&B.
No, but you can get some basic information for free. Dun & Bradstreet offers a free tier for their Credit Insights program, but it won’t show you your PAYDEX score. Instead, it shows a risk range indicator, a general idea of whether your score is in a healthy place and if it’s gone up or down.
The Fair Credit Reporting Act (FCRA) protects a consumer’s right to ask a credit reporting agency for their credit score and access a free copy of their credit report annually. However, business credit scoring is not covered under the FCRA, which means D&B isn’t obligated to provide this information for free.
How to improve your PAYDEX score
Here are a few ways you can potentially improve your business credit score:
- Open tradeline accounts: Every reported vendor relationship is a tradeline, and opening additional tradelines can help you build a stronger PAYDEX score as long as payments are made on time.
- Pay your bills early: As long as the trade experiences are reported to and approved by D&B, paying your bills before they’re due will help boost your score. On-time payments will also help, though not as much. Prioritize paying large invoices early, as they carry more weight in PAYDEX’s algorithm.
- Ask suppliers to report to Dun & Bradstreet: Some vendors may not automatically report to D&B, but you can ask them if they’ll submit the trade experiences to the firm. Increasing the number of on-time or early payments reported to D&B will help your PAYDEX score.
- Dispute inaccurate reports: If there is inaccurate information on your PAYDEX report, you can dispute it. Reports that are proved to be inaccurate can be corrected, potentially improving your score.
Frequently asked questions
After a business acquires a DUNS number which can take up to 30 business days, trade suppliers can begin submitting data to Dun & Bradstreet.
A PAYDEX score cannot be generated until D&B receives information on three trade experiences from at least two reporting parties (six trade experiences total). The time it takes to establish a business’s PAYDEX score depends on how long it takes for D&B to receive these reports.
While most lenders run business credit checks during the application process, it’s possible to get a loan or line of credit without a PAYDEX score.
However, without a PAYDEX score, lenders may put a stronger emphasis on your personal credit history. They may have business loan requirements specifying that owners personally guarantee the loan, which means your personal assets could be at risk if you default.
In addition to the PAYDEX score from Dun & Bradstreet, other business credit scores include the FICO Small Business Scoring Service (SBSS), Experian’s Intelliscore Plus and Equifax’s Business Credit Risk Score.
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