What Is A Paydex?

A Paydex is a score given to a business by Dun & Bradstreet.

Dun & Bradstreet is a businesses credit reporting agency. They collect information on and sell reports and credit scores for every business almost everywhere in the world. The credit score given by Dun & Bradstreet to show how timely a business pays his bills is called a Paydex score.

Dun & Bradstreet collect this information from banks credit agencies and businesses both on the national and local levels. They gather and manipulate this information to compile reports on which businesses pay or don't pay their vendors on time.

The higher your Paydex score is, the better your payment history is with Dun & Bradstreet. If you're Paydex is 80 or higher you have a phenomenal business credit score and should have no problem getting approved by vendors for lines of credit, credit cards, loans and equipment for your business. (Age and other factors play a role, but from a computer generated approval for example, on small ticket purchases, you should not have a problem.)

Let's pick an example.

Say I want a line of credit with the Home Depot. I go to the store or online to their website-and then go to the business credit card tool. I then choose the revolving business credit line. After entering all the information they request someone from Home Depot's credit department will take a look at my business credit file. While my file might be fairly new or empty or activity, there are certain things they will want to see to make sure that this request for credit is coming from a legitimate business and not from a half hatched, home based, Italian ice selling enterprise.

What makes a business legitimate in the eyes of Vendors and Suppliers?

Although businesses can be home-based and be legitimate, as many are, and although businesses can be based at major corporate buildings and still get not be legitimate and only using the address as a "front", there are several things that a credit analyst for a company as well as unrest to themselves would look at to see the likelihood of this business applying for credit is, in fact, a legitimate business entity.

The first thing a vendor will look for is- does the business have a listing with 411? Another is, how many square feet does the business have? Is that amount of square footage realistic for the type of business that this business claims to be and for the type and amount of credit it's applying for? Is the business based out of a P.O. Box or mailboxes etc. type location? If it is, did the customer Claim that that is the physical location of the business itself?

The Vendors software will figure out based on the information they have on your firm certain warnings to watch out for and certain things which they would want to verify regarding your business before extending credit to you.

Here's a tip: when you buy products from the companies that grand credit easily for example NEBS, Uline, or other such companies that grant credit easily to new and unknown businesses; make sure you pay them as soon as possible. You should even consider paying them before you get the bill. As soon as the product arrives – Pay.

This is because, unlike your personal credit score which is not affected as long as you pay on time by the due date, your Paydex score changes based on the number of days it took you to pay your invoice. That means that if your bill is due in 21 days (net 21) or in 30 days (known as net 30) and you paid on day 21 your Paydex score would probably be something around 80 if that were the only thing affecting the score because you paid on the date it was due.

If you paid a few days after the date due, your business credit score would probably be something around 75. However if you paid several days before the date due your credit score will be higher and closer to 85 or even 90.

Having a 411 listing in the directory as a business is of utmost importance. Experience shows that the success or failure of a new and/or home based business and the likelihood of the business failing is directly connected to the amount of energy and investment the owners put into starting it. When the owner doesn't have much invested when a business is home-based, the company will still have a certain comfort level in seeing that you went and got a business phone line are not just using a personal phone line as a business to save a couple of dollars every month.

Even if you're not listed in the Yellow Pages itself which may charge money for a basic listing, the fact that when they call your local Directory Assistance (411) they can verify that it is a business. Having the phone number as a business phone line shows that you have, in fact, done the steps necessary to be a business which is here to stay, even though you are based from home. They would feel comfortable that you will sweat out the tough beginnings of starting a company because you invested your money, your time, and your energy into making the business stand on its own two feet.

But what happens if you have a payment due and you can't pay on time?

It is imperative that if you have a payment due and you cannot pay on time, that you contact the vendor and make alternate arrangements before the payment is due. This is because your Payment Pattern at D&B, in addition to your Paydex, will change in a yearly if Dun & Bradstreet’s model feels that you are less likely to pay your bills on time in the future.

Having a low Paydex score will significantly reduce your access to credit. If you're Paydex is currently under 70, you should focus and work diligently to raise your Paydex to 75 or even better, to 80 or above before applying or seeking new credit for your business. Be its equipment leasing, vendor credit lines, or even a business partnership with another business, since many other businesses will check your Duns Report and Paydex score before doing any partnership with you. Also note that your competition can and many times do buy your Business Credit Report from D&B. and any information you provide them with on their website or if they call you up, will be reported on your profile and potentially quite easily to your competition.

Dun and Bradstreet is not a government agency. It is a private, profit-making enterprise, which must be dealt with carefully to get the benefits from and yet avoid the pitfalls of them using your information against you.