6 Business Credit Scores to Watch
Most small business owners are aware of their Dun & Bradstreet Paydex score. Some will even have a basic understanding of how it can impact their ability to achieve credit, get contracts, and lower interest rates. Very few realize there are seventy-five factors that feed into five other D&B scores, any of which can boost your progress a whole lot faster.
D&B's Predictive Indicators
Delinquency Predictor Score
Financial Stress Score
Supplier Evaluation Risk rating
D&B Viability Rating
Overall, the business credit report encompasses a massive amount of data. Compiled from a vast array of sources, that data feeds comprehensive algorithms that determine the age, location, size, and creditworthiness of a business. If a lack of viable information is presented, generic data will generate base scores, doing little to represent the true ability of a business. To boost the below scores into a better position, you need to boost the data that feeds the process.
The Paydex score is a dollar-weighted indicator of how promptly bills are paid. The score ranges from 0 to 100, but an 80 Paydex is optimum, indicating you always pay your bills within terms. The only way to score higher than an 80 is for your vendor to report that you pay on anticipatory terms, such as 2%10Net30. If your Paydex is lower than 80, there is a slow payment reported onto your file. Some slow payments can be disputed and removed, restoring your score to perfect health again.
The Delinquency Predictor Score identifies the potential for a business to pay their bills slowly or become delinquent in the next 12 months. This score is driven by the solid performance of your business, the variety and strength of your vendors, and history showing prompt and responsible payment management. You can boost this score by adding vendors and suppliers who can report that you always pay on time. In addition, you can maintain a solid score by paying your bills promptly, even if there is an unforeseen issue with an invoice or order.
The Financial Stress Score attempts to predict the likelihood of a business becoming insolvent or seeking relief from its debt in the next 12 months, but does not necessary mean that the company will exhibit financial stress. This score is averaged against the successes and failures of other companies in the same industry as yours, as well as the same size, age, and even in your same legal structure. If you perform better than the base scores, your risk rating will be lower. If you perform worse than average, your risk rating will be higher. Maintaining accounts with a variety of suppliers and consistently paying your debts on time helps to show positive past performance and financial strength.
While the Supplier Evaluation Risk rating is primarily based upon payment performance with your suppliers, it also factors in their strength and stability. After all, how well will you be able to perform if your suppliers go insolvent? To build a strong SER score, it's important to maintain a variety of suppliers rather than relying on just one source for the products and services you need to run your business. As you use and re-use those same suppliers, your risk rating will become lower, indicating a likelihood of your business continuing to succeed.
The D&B Viability Rating does exactly what it says, measuring the viability of your business based upon the quantity, quality, and viability of the data available on your business. The rating is broken into four segments: Viability Score, Portfolio Comparison, Data Depth Indicator, and Company Profile. Higher scores indicate missing or incomplete data. If general information about your company is broadly represented in both D&B's internal data and external firmographics, your scores will be lower and your D&B Viability Score will likely be a good indicator of your potential to succeed.
The D&B Rating is a very basic indicator of the size and strength of your company. If you provide D&B with your most recent financial statements or tax returns, your company will be represented with a ranking based upon your financial strength, debt to income ratios, and overall composite credit appraisal. If you choose not to provide financial data, your company will be sized according to how many employees you have and the overall composite credit appraisal. While businesses are not required to provide financials unless they are publicly traded, many small businesses find this is an easy way to project growth from year to year.
If you are a small business who has yet to accomplish a solid business credit profile, or if you have struggled to achieve credit based solely upon the merit of your company, you can now look to the scores in your business credit profile to boost your business to the next level and get you to your goals faster.
We can provide you with the guidance and insight to help you succeed. Feel free to contact us if you have any questions or would like to schedule a free one-on-one business credit analysis.
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