The secret to your Paydex score
Website design By BotEap.comWhen applying for small business credit, your Paydex score is probably the most important factor that lenders consider. A Paydex score is your business version of a personal FICO score. It is a score generated by the Dun and Bradstreet reporting firm that reflects your payment history to vendors and other lenders in a timely manner.
Website design By BotEap.comIf your business credit has a high enough Paydex score, your business can instantly qualify for significant vendor credit, as well as business credit cards, equipment financing, bank loans, and lines of credit. If your business does not have a good Paydex score, you will have trouble establishing new credit and existing lines of credit may be in jeopardy.
Website design By BotEap.comD and B compile your Paydex score through ongoing payments input from providers reporting whether you pay early, on time, or make late payments. The Paydex system ranks businesses on a scale of 0 to 100. A score of zero is the lowest and a score of 100 is the best possible score.
Website design By BotEap.comAny Paydex score above the 80 level indicates that a business pays its invoices on time. Small business owners should focus heavily on keeping their Paydex score at or above level 80. New businesses need to establish their score as soon as possible.
Website design By BotEap.comIncreasing your Paydex score is not as complicated as increasing your personal FICO score.
Website design By BotEap.comA) Your Paydex score is based solely on your payment history to reporting lenders. By differentiating reporting providers from non-reporting providers, you can quickly increase your Paydex score simply by paying those providers ahead of time. By paying reporting providers ten days before your invoice is due, your Paydex score can increase significantly. Since your Paydex file shows that you are paying the reporting providers ten days before the due date, it is calculated that you are paying all of your providers that way, even if you are paying the non-reporting providers on their normal terms . By selectively paying certain vendors ahead of time, you can increase your score without affecting cash flow. In a few months, your score can be very, very good.
Website design By BotEap.comB) This is what your Paydex score means:
Website design By BotEap.comScores are directly related to your payment history as follows:
Website design By BotEap.comIf your score is 100 (almost impossible to achieve), it means that you pay your bills often before they even arrive in the mail.
Website design By BotEap.comIf your score is 90, it means that you are paying well in advance of the due date to take advantage of discounts or incentives offered by prepaid providers.
Website design By BotEap.comIf your score is 80 or higher, it means that you always pay your bills on time. It is not often early and never late. Just in time. This score is the goal of most companies.
Website design By BotEap.comIf your score is 70, it means that your providers report that you pay approximately two weeks after the invoice is due, which is commonly considered to be paying in the “grace period.”
Website design By BotEap.comIf your score is 60, it indicates that you are behind in paying your bills, but rarely until 30 days later.
Website design By BotEap.comIf your score is 50, it indicates that you pay your bills, but usually about a month after they are due.
Website design By BotEap.comIf your score is 40, it indicates that you are often two months behind.
Website design By BotEap.comAnything under 40 is so bad it’s really not worth checking out.
Website design By BotEap.comc) There may be a cutoff Paydex score for personal warranty requirements
Website design By BotEap.comIf you, as a business owner, do not have excellent personal credit, a difficult situation is often created when a supplier requests a personal guarantee.
Website design By BotEap.comThe key is to start with providers that don’t require it. An example would be a web hosting company like Blue Ribbon Web Hosting (http://www.blueribbonwebhosting.com). They provide US based LLCs and corporations with net-30 accounts per day with no owner warranty.
Website design By BotEap.comFind companies like this that report D and B and offer credit to new businesses. There are many out there if you look for them. Look at the services you need to buy anyway and find a reporting provider for that service, there may not be a lot of dollar volume in your report, but it helps to establish a file and a good Paydex score.
Website design By BotEap.comJust four or five reporting creditors paid ten days in advance can boost your score in just a few months.
Website design By BotEap.comOnce you have an established track record with small providers, you can apply with larger and more difficult providers.