5 Steps To Perfecting Your Business Credit
The Paydex score or business credit is a system that Dun and Bradstreet instituted as a measure of creditworthiness for businesses. It is very similar to the FICO credit scoring system that is used to track consumer credit. Whether your small business is new and has not yet established credit, or if your business credit has suffered, it will be necessary to build a good Paydex score. You can accomplish this in a few different ways.
Build Business Credibility
Just because you’re open (or about to open) for business, doesn’t necessarily mean you’ve put yourself on the map. You can’t effectively establish credit until you’ve established your business! Get a business phone number and have it listed in the directory. Every credible business should have one. You’ll also want to open a business bank account in your official (legal) business name and regularly use it to pay your bills. You need to open a business credit file in order to establish business credit.
Establish Your Business Credit Reports
Dun & Bradstreet, Experian, and Equifax Commercial give you the opportunity to make sure the record of your business’s details is accurate.
Obtain Initial Business Credit
Get approved for new credit, in your business’s name, that reports to Dun & Bradstreet, Experian, and Equifax. Note: This is credit that reports only to the business credit reporting agencies, not the consumer credit bureaus.
Obtain Store Business Credit Accounts
After the initial credit obtained in Step 3 is reported to the business credit reporting agencies, you can start obtaining credit at major retailers, Net 30, and even revolving store credit with retailers such as Tiger Direct, Amazon, Staples, Lowes, AutoZone, Macy’s, Conoco, Exxon, and many, many more.
Obtain High Limit Store Revolving Credit Cards
Revolving accounts mean you’ll only need to make a minimum payment each month on what you charge, instead of paying off entire balances at the end of the month.
How Does A PAYDEX Score Work?
Were you recently notified of a change to your business’s PAYDEX Score? If so, you probably have questions about what this means and how it may affect your company.
The PAYDEX Score is a dollar-weighted indicator intended to reflect a business’s past payment performance. Companies receive a score between 1 and 100, where a higher number represents a greater likelihood that a business will pay its debts on time. This proprietary score is calculated based upon Trade References, which are records of payment experiences submitted to Dun & Bradstreet by suppliers and vendors. These records can include overdue debts and bills that have been sent to collections, or on-time and early payments. Dun & Bradstreet can consider Trade References from up to 875 individual business partners when determining your PAYDEX Score.
If your PAYDEX Score has recently increased, data available to Dun & Bradstreet suggests that your business may be in a better position to pay its debts in a timely manner. If your PAYDEX score has decreased, it means your company may present a higher risk of delinquency or default for business partners.
If you’ve received notice that your PAYDEX Score has recently changed, the infographic below should help you understand the details of this important indicator.
How Can I Check My Business’s PAYDEX Score?
You can review your company’s PAYDEX Score, along with other business credit scores and ratings, by purchasing a business credit report. You may also want to take a look at your competitors’ scores and ratings in order to better understand their financial health.
Who Can Check My Business’s PAYDEX Score?
Anyone can purchase your business’s credit report. Customers, suppliers, lenders, and landlords may review your PAYDEX Score in order to help:
- decide whether or not to do business with your company
- set credit terms that more accurately reflect the level of financial risk your business represents
- set insurance premiums
- decide if they want to take you on as a tenant
What Can I Do to Impact My PAYDEX Score?
First, make sure to always repay your debts on time or ahead of schedule. Next, encourage suppliers and vendors to report they’re positive payment experiences to Dun & Bradstreet. Payment experiences that go unreported cannot be considered when Dun & Bradstreet determine your business’s credit scores and ratings.
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