How to Improve Your Paydex Score
Dun & Backstreet
D&B is the oldest and largest credit reporting agency. You will always need a DUNS number to start building business credit. If you don’t have a DUNS number, you can get one free at: www.creditsuite.com/duns or dnb.com/duns-number/get-a-duns.html. A DUNS number gets a business into D&B’s system.
It is not enough to just have a D-U-N-S number if you want a score from D&B, you also need payment experiences. A payment experience is just a reported purchase from a business which reports to D&B. Three payment experiences should be enough to meet their requirement.
D&B offers database-generated reports. The idea is to help their clients decide whether a business is a good credit risk. Companies use the reports to make informed business credit decisions and avoid bad debt. Several factors enter into creating such a report. In general, when D&B does not have all the data they need, they will indicate as much in their reports, but missing data does not necessarily mean a company is a poor credit risk. Instead, the risk is unknown. Unknown information tends to make lenders nervous.
D&B continuously gathers data. It works to improve its analyses to assure the greatest degree of accuracy possible. To ensure a report as accurate as possible, give D&B your company’s current financial statements and eliminate any unknown pieces of information.
PAYDEX is probably the best-known D&B score. Some others include: D&B rating, Delinquency Predictor, Financial Stress Score, and Supplier Evaluation Risk Rating. For a sample Business Information Report, visit: dnb.com/products/small-business/business-information-report-snapshot.html
This is D&B’s dollar-weighted numerical rating of how a company has paid its bills over the past year. D&B bases this score on trade experiences reported by various vendors. A PAYDEX score ranges from 1 to 100. Higher scores mean a better payment performance. PAYDEX scores reflect how well a company pays its bills.
What Influences Your PAYDEX Score?
Larger bills get more weight in the calculation. It leverages data from D&B Global Trade Exchange Participants to calculate a dollar weighted average days to pay. D&B suggests that businesses use it for risk knockout. Payment experiences are gathered by D&B from suppliers and vendors a firm does business with. Each experience reflects a different supplier and reflects how bulls are met within relation to the terms granted. Up to 875 payment experiences are used to generate the PAYDEX score, and up to 80 representative payment experiences are reported in your business credit report.
D&B has created risk categories to make it easier to translate a PAYDEX Score into understandable risk groups:
PAYDEX 80-100: Low risk of late payment
PAYDEX 50-79: Moderate risk of late payment
PAYDEX 0-49: High risk of late payment
Based on changes to your PAYDEX, D&B takes a proactive approach to notify you when a change in your score is bringing you closer to a different risk category.
Improving Your PAYDEX Score
Addressing any problems with your PAYDEX score head-on is a useful strategy. Hence, if your business is regularly late with payments, then you will need to address issues of organization and perhaps time management. You may need to hire an accountant or make a simple adjustment such as setting bill payment reminders in your phone. Since PAYDEX Scores are dollar-weighted, you quite literally get more bang for your buck by paying your bigger bills first. Because your PAYDEX Score reflects trends, you can help out your business by starting a practice of paying on time and sticking with it.
D&B Business Information Reports
For a snapshot of your business’s financial health, the best report to get is probably a Business Information Report, which currently costs $139.99. You can get a Business Information Report on your own business or a company you’re considering doing business with. In addition to a PAYDEX Score, a D&B Business Information Report contains trade payments, trade line specifics with dollar amounts and terms, legal events, company events (mainly concerning ownership and management), and a company family tree showing ownership specifics. A Business Information Report also contains a Risk Assessment Summary. A Risk Assessment Summary shows maximum credit recommendation, your business’s PAYDEX score, Delinquency Predictor percentile, Financial Stress percentile, and Supplier Evaluation risk.
Monitoring Your D&B Credit Scores and Reports
Business credit reports are not always perfectly correct. All of the major CRAs, including D&B, are committed to accuracy. However you won’t know there are errors unless you monitor your business credit reports. For D&B only, you can monitor your business credit reports via CreditMonitor, which currently only costs $39 a month. To purchase a business credit monitor, visit: dnb.com/products/small-business/credit-monitor.html. The costs of business credit monitoring can add up fast. At Experian, your best bet would be a Business Credit Advantage Subscription Plan, which currently costs $189 per year. To purchase a Business Credit Advantage Subscription Plan, visit: sbcr.experian.com/pdp.aspx?pg=Sample&link. At Equifax, you would use Equifax Complete, which currently costs $19.95 per month after an offer of 30 days for $4.95.To purchase Equifax Complete, visit: equifax.com/equifax-complete/Equifax. Add all of these plans together for the year and it is $468 for D&B, $189 for Experian, and $224.40 for Equifax for a grand total of $881.40. You can monitor your business credit at D&B, Equifax, and Experian through Credit Suite for considerable savings over what it would cost you at those CRAs all in one place. Credit Suite offers monitoring through the Business Finance Suite. See what credit issuers and lenders see so you can directly improve your scores and get the business credit and funding you need. Visit: creditsuite.com/monitoring.
Correcting Your D&B Credit Scores and Reports
If errors are bringing your score down, then correctly those mistakes will raise your PAYDEX score. Get a Business Information Report from D&B at: dnb.com/products/small-business/business-information-report-snapshot.html. After reviewing your Business Information Report, update the relevant information if there are mistakes or the information is incomplete. At D&B, you can do this at: dnb.com/duns-number/view-update-company-credit-file.html
Disputing Issues With Your D&B Credit Scores and Reports
D&B won’t change your business credit scores without proof. Disputing business credit report errors normally means you have to mail a paper letter. Be sure to include duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never mail the originals, always send copies and keep the original copies. Fixing credit report errors also means you specifically spell out any charges you challenge. Make sure your dispute is as clear as possible. If you need to mail anything in, then use certified mail so that you will have proof that you sent in your dispute. Be specific about the concerns with your report D&B wants you to go through D&B Customer Service to add payment experiences. D&B’s Customer Service contact number can be found at: dandb.com/glossary/paydex.
D&B collects objective data points on businesses and creates Business Information Reports from them and other reports. The more information D&B has, the more comprehensive the report is. It is in your best interest to monitor your D&B reports, and correct or dispute any issues you find.