How to Get A Paydex Score Above 80

Have you ever wondered if it was possible to boost your D&B Paydex score above 80? While most small business owners would be thrilled just to reach that milestone, there are times when an above average score can certainly be beneficial. Unfortunately, people who search the web for answers are being inundated with inaccurate information. It's time to set the record straight!

What is a Paydex score?

The Paydex is a numerical score that tells potential creditors how well (or poorly) a business pays their debts. The score ranges from 0 to 100, with 80 being the optimum Paydex that most businesses strive to achieve. The higher the score, the more likely a business will pay creditors on time. A minimum of three payments from three different creditors is required in order to achieve a Paydex score. Once that milestone is reached, however, a company still needs to keep paying their bills on time if they want to maintain the Paydex score as high as possible.

What impacts your Paydex score?

The Paydex score is primarily impacted by how timely a business pays their creditors. If a company has Net 30 terms with their creditor and the creditor always receives payment within 30 days, the creditor will report to D&B and other business credit bureaus that the debt was paid "within terms". The Paydex score is dollar weighted, which means that higher dollar values are going to have a greater impact on the score. You can have a hundred on-time payments, but one high-dollar slow payment can reverse all of your progress in an instant.

What doesn't impact your Paydex score?

A Paydex score is NOT impacted by whether you are using 30% of your credit line or 90%. It's also NOT impacted by your debt-to-income ratios. And no, it doesn't matter how many days ahead of the due date you pay your bill. If you have Net 30 terms and you pay within 30 days, the bill is considered "paid within terms" regardless of whether you paid 5 days before the balance was due or 25 days before it was due. Paid on time means just that — paid on time. Period.

If the optimum score is 80, why does the Paydex scale go to 100?

Because there are other kinds of payment terms — specifically, discount or anticipatory terms — and they are an added boon to creditors. That's because they don't have to carry your debt on their books for an extended period of time. Payments made under anticipatory terms such as 2%10Net30 or 1%5Net15 tell creditors you are willing to pay faster, especially if there's a cost-savings incentive.

Other types of anticipatory terms are also incentivized, such as paying off contracts, loans and revolving credit ahead of schedule. Examples might include a factoring contract scheduled to be paid in four quarterly draws but is actually paid in full on the third draw, or a long-term loan that gets paid back in half the time.

So, how do you get your Paydex score above 80?

First of all, let me just reiterate that one should never snub their nose at an 80 Paydex score. Like I said earlier, most small business owners would be delighted just to be where you are.

Whenever possible (and practical) see if you can negotiate anticipatory terms, especially when making high-value equipment purchases or restocking inventory. 2% or 5% may not sound like much, but that's money that can be spent elsewhere. Discount terms also bring added confidence to the vendor-client relationship, especially if those discounts keep you from switching to one of their competitors.

If you already have anticipatory terms with your vendors and suppliers, take steps to add those payment experiences to your business credit report. If your creditor is an autoreporter, ask them to verify the correct payment terms are being reported to the bureaus. Believe it or not, yes, misreporting does happen, especially if you achieved discount terms after having previously been reported using other payment terms.

If your creditors aren't autoreporting, give me a call so we can talk about submitting those vendors to the business credit bureaus. Manually adding payments to your credit profile is the fastest, easiest and cheapest way to positively impact all of your business credit scores and the impacts can last up to 24-28 months!

Who couldn't use a nice little boost to their Paydex score right about now?