Updated: Feb 3
Whether you need to purchase inventory, add a new vehicle to the fleet, hire new staff, buy investment property, or lower insurance premiums — every business owner wants or needs credit at some time. For some business owners, the ability to have ready access to credit may mean having the luxury of buying when the price is right rather than having to put those purchases off until a later date. For others, it may mean the difference between the business carrying the weight of a loan or adding it to already burdened personal credit. But for every business owner, if you can ignite the turbo-boosters behind your Paydex score, it could help you get to the finish line, and maybe even win the race.
No matter for credit is, the goal is to be able to get it when you need it, and without having to rely on your personal credit or suffer with higher interest rates in the process. If you can boost your Paydex score, you may be able to get more bang for your buck and, in turn, more bucks from your bank.
For those who don't already understand the mystery of Dun and Bradstreet's Paydex score, this is a score that indicates your company's ability to maintain responsible payment habits. It's a dollar-weighted score assigned to your corporate credit file when you have three or more payments reflecting in the file, with at least 2 of those payments being defined as net or revolving credit. But, most importantly, the Paydex score is the single most critically impacting score most creditors are gauging when determining credit approvals.
But not everyone has perfect payment history. Mistakes happen. It's not uncommon to see derogatory information applied to the wrong company, or for payments to be delayed or lost in the mail, or for disputed invoices to continue negatively impacting the credit file. When that's the case, specific steps need to be taken to see if that negative data can be removed from the file, and then further boost the score to put it into a position that is more appealing to your creditors. Below are some tips to help get you to your goals:
Accentuate the positives —
Identify suppliers where you've spent money at least once in the past 12 months, especially those who have invoiced your company for products or services. Submit these companies as trade references using the Dun & Bradstreet Creditbuilder, even if only on a month-to-month basis until your payment history is added to the file. Sometimes, just adding one or more payments to your file can provide a significant boost, up to a 90% improvement. While COD or prepaid payments won't help as much as credit payments, they can still help you to achieve a Paydex score and move you to the next level.
Make sure all of the information in your D&B file is up-to-date and accurate. You can do this at no charge by registering for access to your company's credit file using a free DUNS Manager. It usually takes less than 15 minutes to register and submit your updates, but it can benefit your business now and in the future. Pay especially close attention to any data that you don't recognize as ever being associated to you or your company. Misrepresented or data incorrectly assigned to your company can do more harm than good.
You should also make sure to always make purchases using an account established in the business name. Instead of just dropping by the store to pay for something as a point-of-sale transaction, go online to create a business account, pay for your purchase, and use the "pick up in store" option. This helps to establish a business relationship with your supplier that can have multiple benefits, such as being offered credit terms later or having that transaction reported to the corporate credit bureaus.
Eliminate the negatives —
Review the data associated to your company to make sure it is only data that is relevant to your business. Again, you can do this through the DUNS Manager or by submitting a support ticket. Oftentimes, your file can end up with information in it that does not even pertain to your company, so you are best to get this information deleted from your file. Even positive data can turn around later and impact you negatively.
Slow payments can significantly reduce your Paydex score and keep you from achieving credit so, while you are in the free DUNS Manager, you should also dispute any payments not paid in terms, marked as slow, or identified as a bad debt or collection. Disputed payments are usually removed within about 10 days, but you will want to watch your report in case they return within 30 days. Some derogatory history could require multiple re-disputes or even a "block request" before the transaction is deleted from your file.
Also check the Public Filings section of your report to make sure no UCC filings, liens, suits, or judgments are not erroneously posted to your file. You can challenge incorrect data to this section as well, but these items typically can take up to 30 days before they are removed.
Ignite your turbo-boosters —
What are turbo-boosters? Well, those are my not-so-secret weapons that I talk about all the time. They are the little behind-the-scene things you can do to help boost your Paydex score without even trying.
Here are 7 turbo-boosters to get you on the right track...
1. Use a variety of suppliers. Instead of always buying ink and paper from one supplier, open accounts with new suppliers to spread your payment history around and add more history and strength.
2. Get your foot in the door. When placing an order online, call the supplier to see if they are willing to give you a small net terms account that will invoice your company for the purchase instead.
3. Synchronize your data. Make sure all your vendors, suppliers, and creditors (as well as new accounts) have the business name, address, and phone exactly as it is in the D&B report.
4. Enough with the cash already! Whenever possible, pay for purchases using a business credit or debit card or, even better, with a company check that has your company name and address on the face.
5. Reward your business. Signing up for rewards programs can get your foot in the door and get your business onto their "potential client" list, which could benefit your business down the road.
6. Be the early bird. Always mail your payments 10 days before the due date. When paying online, be sure to allow at least five days for the payment to be processed.
7. Think for the future. Never be afraid to ask your suppliers if they are willing to report your payment history to D&B. Remember, one payment can possibly boost your scores by up to 90%.
Above all else, work your credit and make it work for you. If you need help, book a free one-on-one consultation or give me a call so we can take a look at the information in your credit file. Believe it or not, you may be further along than you think!