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PAYDEX: Understanding Your Score


I was recently asked this question by one of our Twitter followers: "So many different descriptions... What exactly is a "good" Paydex score?" At first, I thought she was kidding. I mean, really... How many different explanations can there be?

But then I searched the Twitter hashtag #paydex that I saw what she was talking about. There were so many people and companies touting their own versions of what a Paydex® score is, and ways to get one, and what is considered a good score... There was even one high-dollar, so called "credit guru" who promotes a service to get clients "a perfect 100 Paydex score in 90 days." It was amazing, and actually, a little scary...

While employed at Dun & Bradstreet®, people were actually fired for identifying any Paydex® score as being a "perfect" score. It became such an issue, I instituted into the trainee manual to instead define the Paydex® score as ranging from 0 to 100, with 80 being the "optimum" score.

Since there is so much misinformation out there, here's some legitimate information every business owner or manager should know:

A Paydex® score is just one of six creditworthiness scores provided by Dun & Bradstreet® (also known as D&B®), the world's oldest and largest corporate credit reporting agency. Over its 180 year history, D&B® has devised specific algorithms to assign a strategic value to a business's history of repaying debt. The higher the score, the more promptly debt is paid. A lower score is indicative of slow payment, collections, or bad debt write-off.

The Paydex® score is dollar-weighted, placing a higher value to larger debt being paid promptly. Even so, those with high positive payments can be negatively impacted if they have multiple instances of slow payment (even if those payments are of a lower value). Current outstanding debt will have a higher value than older debt, and collections or bad debts can significantly impact this and other D&B scores. You can see a full Paydex® rating chart here.

An 80 Paydex® score is considered "optimum" because it indicates a commercial concern pays the vast majority (if not all) of their business debt on-time. While it is possible to achieve higher than 80, to do so would require your suppliers report to D&B® that you primarily pay on discount, known as "anticipatory" payments. Commercial operations who pay their debts using discounted net terms — such as 2% 10 Net 30 — can often find themselves with a Paydex® score above 80.

In my eight years experience, both while working for D&B® and after starting my own business credit-enhancement business, the highest Paydex® score I have ever seen was 93, and that was due to a $10m payment being auto-reported to D&B® whereas the corporation used a 2% discount and paid within 10 days of invoice date. While it is not uncommon to see an 82 or 84 Paydex® score, a "perfect 100" would be more rare than finding a single gold coin in the middle of the P