If you’ve been looking for a business loan, you’ve probably been told that you need a business FICO score or a PAYDEX score in order qualify. Since you already have a personal FICO score, you probably aren’t wondering what a business FICO score is. Most business owners are more curious about PAYDEX. If you aren’t sure what a PAYDEX score is, how it works, or why you need one, this blog post will clear things up.
A PAYDEX score is very similar to your business FICO score. It, too, helps business lenders measure the risk of lending to a company. Unlike a business FICO score, PAYDEX scores are calculated by the Dun and Bradstreet credit reporting bureau. The PAYDEX score has a different range than what is normally associated with credit scores as well. Instead of the standard 300 to 850 range we all are more accustomed to in the world of personal finance, PAYDEX scores only range from 0 to 100.
Since it is a credit score, you should regularly check your company’s PAYDEX score to make sure that it’s accurate, and to ensure that you’re actually going in the right direction. In order to do so, you may be required to have a DUNS number to track your score. Luckily, business owners can request a DUNS number, or the Dun and Bradstreet credit reporting bureau can automatically create one. Either way, if you have a PAYDEX score, you will most likely be made aware of your DUNS number.
The best score that you can have for a PAYDEX is 100, with 80 being considered the minimum “prime” score. Lower scores mean higher risk for delinquency. Unlike other credit scores, PAYDEX works by tracking when you pay your bills. Here’s a very basic breakdown of how scores are measured: a score of 80 means that you pay on time, every time. A score of 100 means that you pay your bills as much as 30 days or more ahead of when they are due. The lower the score is from 80, the longer your bills have been delinquent. A score of 0, therefore, basically means that you’ve never paid a bill even remotely on time.