Have a from Paydex score of 80 and your company can be eligible for the entire credit it requires.
Have you heard this phrase previously?
It’s probably the most misguided and misleading advice being offered in the market and, unfortunately, too many small-scale business owners have been influenced by this false advice.
In this blog, let’s clarify this particular issue, so that you can have a greater understanding of what you can be expecting during the process of credit-granting.
In order to obtain an Paydex score, your company must have at least four payments that are reported to your business’s Dun as well as Bradstreet credit report.
If you’re not acquainted with Paydex scores, it’s essentially a dollar-weighted measure of how your business is paying its bills. Scores that range from 1 to 100.
Similar to how lenders utilize their personal credit score to judge the creditworthiness of a person, a business or lender utilizes a credit scoring system such as Paydex to evaluate a business’s creditworthiness.
Be aware this: the Paydex score is Dun and Bradstreet’s personal scoring system, whereas Experian is using it’s very own Intelliscore and Equifax utilizes its own Small Business Credit Risk Score.
In the case of Paydex scores, a score of around 80 is considered to be a high score. Some people even say it’s equivalent to an 720 personal credit score.
Although many lenders and suppliers utilize Paydex Scores as part of the process of granting credit, there are numerous other elements they evaluate that are not included.
Other reasons comprise:
- Highest Available Credit Limits
- Payment History
- Different types of accounts
- Age of accounts
- Ratios of Debt to Credit Limits
- The Credit Limit Recommendation of DNB
For instance, you could get four trade references positive to your DNB file. $500 is the maximum credit limit for each of the four accounts, and still be able to score an 80 on Paydex.
This is due to the fact that DNB’s rating system requires four positive references to trade, but if the references you have are not enough, it is unlikely that you can qualify your company to be approved for a large amount from cash credits, lease credit business loans, and credit lines.
Furthermore that having your business solely listed on Dun and Bradstreet is similar to having only one credit file, with just only one credit reporting agency.
Let’s suppose that all there is is a credit file by Equifaxbut you do not have a credit file at Transunion and Experian. It is unlikely that you will be approved for a mortgage as the lenders don’t have enough information to judge your creditworthiness overall.
The same is true to your business too. To present the full picture of your business’s credit history, you’ll require an account with the three main businesses credit bureaus.
Therefore, getting an score of 80 on Paydex will not necessarily open the floodgates to credit unless you’ve got other factors that are positive that play a significant factor in the size of the credit limit and terms of payment lenders are willing to offer to your company.
Achieving a positive score of 80 will have its advantages, and it will allow your company to get several net-30 and net-60 accounts with suppliers. However, do not expect huge credit limits until you has established itself with an established track record of payment in addition.