What is a PAYDEX® Score?

Quick insights

• A PAYDEX Score is a type of business credit score typically used by lenders to determine your creditworthiness.
• PAYDEX Scores range from 1-100, with lower ranges indicating higher risk of poor repayment history, and higher numbers indicating less risk.
• Having a strong PAYDEX Score can help businesses potentially unlock more favorable terms.

If you have a business or are thinking about starting one, you’ll likely come across the PAYDEX Score. This credit score is not the same as your personal credit score—rather, it is specific to your business’s creditworthiness. Let’s review this type of business credit score in more detail below.

Understanding PAYDEX Scores

A PAYDEX Score is a type of business credit score generated by the business credit bureau Dun & Bradstreet^®. It was developed in the 1980s with the intention of standardizing credit evaluation, building transparency in business transactions, improving efficiency in credit decisions and encouraging business owners to make timely payments. Today it is used by businesses and lenders, along with other business credit score models.

What is a PAYDEX Score?

A PAYDEX Score indicates a business’s creditworthiness, or its ability to repay debts and meet financial obligations. The number ranges from 1-100, with higher numbers implying better payment performance and creditworthiness.

The score is typically used by lenders, suppliers and potential business partners. It can be a tool to help determine your eligibility for lines of credit and the terms that come with them, such as annual percentage rates (APRs).

Key components of a PAYDEX Score

Like personal credit scores, PAYDEX Scores are built on a foundation of a few key components. These include:

• Payment history: This is perhaps the most important aspect of the PAYDEX Score, as your score is a weighted average of your business’s payment history over the last 12 months.
• Dollar-weighted transactions: PAYDEX Scores are unique in that they are dollar-weighted, which means that the bigger your transaction is, the more impact it can have on your score.
• Trade references: Otherwise known as suppliers or vendors, these entities provide the credit bureau with information regarding payment history.

Your score may be impacted by additional factors, such as:

• On-time payments: Making consistent, on-time payments can positively impact your PAYDEX Score.
• Early payments: Making early payments, not just on the date that they are due, can also contribute to an improved score.
• Late payments: Late payments can negatively impact your score. Generally, the more days you miss your payment, the lower your score may be. For example, payments made 60 days late may impact your score more negatively than if you made a payment 30 days late.
• Industry: If your business industry is considered risky or opening during a volatile time in the market, your credit score may be impacted.

How to improve your PAYDEX Score

Your PAYDEX Score is essentially your business payment history. To improve your PAYDEX Score, you may want to consider focusing on this more closely. For example, you can improve your PAYDEX Score by making your payments earlier and consistently on time.

Understanding your business’s finances on a larger scale can help you prioritize your goals. For example, you may want to focus on paying down debts with higher APRs to help you avoid accumulating more interest costs.

Establishing and maintaining a strong PAYDEX Score might take time, but incremental steps towards improving payment history can have a positive effect.

Note that your PAYDEX Score does not take into account all factors of your business’s financial health, such as credit utilization.

How is a PAYDEX Score used?

Lenders may use the PAYDEX Score as a tool when it comes to assessing your creditworthiness, eligibility for credit, terms and more. With a higher PAYDEX Score, you are probably more likely to receive higher credit limits, lower APRs and more favorable terms. PAYDEX Scores are a way for businesses to demonstrate their ability to repay their debts and unlock financial opportunities to help grow their business, such as loans and business credit cards.

Additional entities that may check your business’s PAYDEX Score include:

• Landlords
• Customers
• Insurance companies
• Suppliers

Understanding PAYDEX Score ranges

According to Dun & Bradstreet, PAYDEX Scores range from 1-100, with 100 as the best possible score you could receive. The scores are categorized by risk:

• 0-49: High risk of missing payments or making late payments
• 50-79: Moderate risk of missing payments or making late payments
• 80-100: Low risk of missing payments or making late payments

In conclusion

PAYDEX Scores are primarily based on your payment history. With consistent, on-time payments, you can potentially help improve this score and leverage it to help your business achieve more favorable outcomes. The higher your score, the better your chances may be of getting approved for lines of credit and receiving more favorable terms.