For any organization, a Paydex score of 80 out of 100 is considered the optimal level of creditworthiness. As a result, it’s always a good idea to make sure your Paydex score is above 80. The score is based on whether or not a company pays its suppliers and debtors on time or even before time.
Before we get into the specifics, let’s have a look at what the Paydex score is. You might think of it as a customized business credit score that determines a company’s creditworthiness. To put it another way, it determines how quickly a business pays its suppliers and vendors. Paydex Scores, generated by Dun & Bradstreet, are very similar to FICO credit scores for consumers, with a few crucial changes.
Why Paydex Score is essential?
Paying the company’s creditors and suppliers on time is always a smart idea as lenders use these Paydex scores to analyze the company’s financing options. In addition, the Paydex score is typically used as a reference for possible business partners to agree to work with you because it indicates how effectively your company is meeting its debt obligations and its general financial health.
What factors go into determining the Paydex score?
Paydex score is determined utilizing more than 800 commercial trade experiences. It is calculated on the aggregate payment submitted to Dun & Bradstreet and compares payments to terms of sale.
The Paydex score is calculated in three steps:
- The sum of all the high credits for each payment classification is taken, and the percentage of total dollars is calculated.
- Each percentage of total dollars is multiplied by the corresponding Index weight for that payment class.
- The points are added to have the Paydex score.
What is the Paydex Score range?
- Paydex score 100: When you pay 30 days ahead of schedule;
- Paydex score 90: When you pay 20 days ahead of schedule;
- Paydex score 80: When you pay on time.
- Paydex score 70: When you pay 15 days after the agreed-upon deadline
- Paydex score 60: When you pay 22 days after the agreed-upon deadline
- Paydex score 50: When you pay 30 days after the agreed-upon deadline
- Paydex score 40: When you pay 60 days after the agreed-upon deadline
- Paydex score 30: When you pay 90 days after the agreed-upon deadline
Why 80 paydex score is important for a shelf corporation?
When buying a shelf corporation, banks and vendors take the Paydex score into account while analyzing the company’s finances and credit application. Lenders usually demand shelf corporations with a paydex score of 80 or more so that they can view your regular credit history. A shelf corporation with a paydex score of 80 indicates that the company pays its bills on time and is a Dun & Bradstreet-approved corporate entity.
What can be done to improve the Paydex Score?
Paying bills on time or before the due date is the most straightforward strategy to increase the paydex score. To summarize, there are a few techniques to raise a company’s Paydex Score:
- Open a business credit card to keep your credit active, and don’t apply for too many credit cards or loans in a short period of time.
- Continue to request a copy of the most recent score from Dun & Bradstreet.
- Opening a tradeline business account is another effective strategy to raise your score.