Paydex Score: Everything You Need to Know

Compare Small Business Loans

{"defaultValue":"50000","label":"Loan Amount","name":"loanAmount","symbol":"$","symbolLocation":"left","showLabel":false}
{"label":"Credit Score","name":"creditScore","defaultValue":"701","value":"701","options":[{"label":"Credit Score","value":"701"},{"label":"Poor (350-500)","value":"350"},{"label":"Fair (501-600)","value":"500"},{"label":"Average (601-650)","value":"600"},{"label":"Good (651-700)","value":"650"},{"label":"Excellent (701-850)","value":"700"}],"showLabel":false}
{"label":"Age of Business","name":"age","defaultValue":"25","value":"25","options":[{"label":"Age of Business","value":"25"},{"label":"Starting a Business","value":"0"},{"label":"3 Months","value":"3"},{"label":"6 Months","value":"6"},{"label":"9 Months","value":"9"},{"label":"1 Year","value":"12"},{"label":"2+ Years","value":"24"}],"showLabel":false}

The Paydex score is a business credit score assigned by Dun and Bradstreet to a company. The score rates the likelihood of a business will make payments to suppliers / vendors on time. Unlike a personal credit score which can go up to 850, the Paydex score ranges from 0 - 100, with higher values indicating a greater propensity to pay on time or sooner than the agreed upon terms. A score of 80 or higher puts your business into the best risk group, meaning that your history of payments has demonstrated a low risk of late payment.

How the Paydex Score Is Used

While your personal credit score is primarily used to measure the financial risk you present to lenders, the Paydex score is used in a few more ways. Like your personal credit rating, it can affect the premiums and interest rates your company pays when it comes to financing such as bank loans or credit cards for small businesses. Better scores may help to lower any interest rates offered to your company when applying for these financial products.

One additional way that your Paydex score is used that generally would not apply to consumers is by vendors. Vendors often deliver goods and services and invoice a business for payment afterwards. As a result vendors have some financial risk of not getting paid. The Paydex score is one metric such suppliers can use to determine whether a new client or business partner might present possible risks going forward. Poor scores may make suppliers reluctant to do business or may limit the size and scope of services they are willing to agree to.

What Goes into Your Paydex Score

A company's Paydex score is determined solely based on a history of trade references. Instead of looking at your history of financing and credit from financial institutions, Dun and Bradstreet uses the payment histories your company has had with the various vendors you may work with. Dun & Bradstreet recommends at least 4 separate trade references in a company's file for a Paydex Score to be calculated. While trade references will remain in your file for a long time, for the purposes of calculating your Paydex score, only those within the last two years are used. This means that it is in a company's interest to have a consistent flow of trade experiences being reported. Unfortunately credit card payments do not count as one of the trade experiences for these purposes.

Size of Credit and Timing Matter

The Paydex score and your overall D&B credit report are an attempt to measure your company's current ability to make payments in a timely fashion. While all the references in the past two years are a factor in your score, the more recent trade experiences are more valuable and will have a higher relative impact on your company's rating. The size of the credit lines is also an important piece to consider. Payment histories on larger amounts will move your Paydex score more than those on smaller accounts. Paying a $10,000 bill late will have a larger negative impact than paying a $500 bill early would. 

What Can Act as a Trade Experience

One issue that businesses can face is finding enough vendors for the minimum needed to receive a score. Many smaller vendors do not automatically report their transactions to D&B. This is often an issue for businesses in service industries that do not work with suppliers or for tech startups that simply have little outside needs. For these businesses, finding trade experiences is about knowing where to look. Owners of these companies can look to using accountants, lawyers and landlords as trade references as long as these relationships are billed through invoices with payment terms. You can also set up a business account with most of the major office supply stores as they often automatically report trade accounts directly to Dun and Bradstreet. 

Managing Your Payment Terms to Improve Your Score

Companies should remember that the Paydex score is about when you make your payments relative to the terms in your agreement with suppliers. By negotiating more longer payment terms with your vendor, you can help increase the probability that your trade experiences reflect positively on your credit. A net 10 trade agreement would give your company a much tighter window to make payments. If situations come up where cash is tight your company may be more likely to be late and have a negative mark on its experience history. Having a longer window gives your business a better ability to pay on time or early which will positively affect your rating.

Getting Your Paydex Score

To Receive a Paydex score your business must first be registered with Dun & Bradstreet and have a valid D-U-N-S Number. While a D-U-N-S number is assigned to each location of your company, your credit score should be assigned to the headquarters or top level number. If your company has multiple offices that may deal with suppliers separately, you should still use the primary D-U-N-S number with vendors that may be reporting trade experiences for credit scoring purposes. The credit rating is meant to measure the organization's financial ability to pay so its vital that the information is correctly attributed to the company as a whole.

What Different Paydex Score Values Mean

The following is a table that discusses what the different values of your Paydex score tell vendors about your payment history. Business owners should not be too concerned with having a "perfect score" of 100, since it would indicate that your company makes payments 1 month in advance of when they are due. For most businesses this is something highly unlikely you can ever achieve and may not make the most sense from a cash flow perspective. Instead, business owners should concentrate on maintaining at least a score of 80 which would indicate on time payments to vendors or suppliers.

PAYDEXAverage Days to PayPAYDEXAverage Days to Pay
100 30 days sooner than terms 59 23 days beyond terms
99 29 days sooner than terms 58 24 days beyond terms
98 28 days sooner than terms 57 25 days beyond terms
97 27 days sooner than terms 56 26 days beyond terms
96 26 days sooner than terms 55 26 days beyond terms
95 25 days sooner than terms 54 27 days beyond terms
94 24 days sooner than terms 53 28 days beyond terms
93 23 days sooner than terms 52 29 days beyond terms
92 22 days sooner than terms 51 29 days beyond terms
91 21 days sooner than terms 50 30 days beyond terms
90 20 days sooner than terms 49 33 days beyond terms
89 18 days sooner than terms 48 36 days beyond terms
88 16 days sooner than terms 47 39 days beyond terms
87 14 days sooner than terms 46 42 days beyond terms
86 12 days sooner than terms 45 45 days beyond terms
85 10 days sooner than terms 44 48 days beyond terms
84 8 days sooner than terms 43 51 days beyond terms
83 6 days sooner than terms 42 54 days beyond terms
82 4 days sooner than terms 41 57 days beyond terms
81 2 days sooner than terms 40 60 days beyond terms
80 ON TERMS 39 63 days beyond terms
79 2 days beyond terms 38 66 days beyond terms
78 3 days beyond terms 37 69 days beyond terms
77 5 days beyond terms 36 72 days beyond terms
76 6 days beyond terms 35 75 days beyond terms
75 8 days beyond terms 34 78 days beyond terms
74 9 days beyond terms 33 81 days beyond terms
73 11 days beyond terms 32 84 days beyond terms
72 12 days beyond terms 31 87 days beyond terms
71 14 days beyond terms 30 90 days beyond terms
70 15 days beyond terms 29 93 days beyond terms
69 16 days beyond terms 28 96 days beyond terms
68 17 days beyond terms 27 99 days beyond terms
67 18 days beyond terms 26 102 days beyond terms
66 19 days beyond terms 25 105 days beyond terms
65 19 days beyond terms 24 108 days beyond terms
64 19 days beyond terms 23 111 days beyond terms
63 20 days beyond terms 22 114 days beyond terms
62 21 days beyond terms 21 117 days beyond terms
61 22 days beyond terms 20 120 days beyond terms
60 22 days beyond terms 1 to 19 Over 120 days beyond terms

Comments and Questions