A Paydex score measures how credit worthy a business is.
PAYDEX Score: What is PAYDEX and how does it work?
We should start by briefly discussing personal credit and the FICO credit scoring system. Your personal credit score is a three digit number determined by this system which ranges from 300 to 850. The higher the score the lower the credit risk. Your credit score is tracked by identifying information such as your name, date of birth and social security number.
Similarly, a PAYDEX score is a business credit score which ranges from 0 to 100. As with the FICO score, the higher the score the lower the credit risk. A unique nine digit number which is referred to as a DUNS number is used along with other identifying information to track a PAYDEX score. A DUNS number may be requested by the business owner or generated automatically when credit information regarding the business is reported.
Now that you know what a PAYDEX score is, you can begin to understand how it is calculated. If you were to setup lines of credit under your business name and the companies which extended you those lines of credit decided to report the credit information, it would affect your PAYDEX score. For example, if you were to consistently pay the bills for these credit accounts exactly on the agreed upon date, you would likely have a PAYDEX score of 80. A PAYDEX score of 80 means you've met the terms of your credit obligation. If you were to consistently pay the bills two days later than agreed upon, you would likely have a PAYDEX score of 79. If you were to consistently pay the bills two days sooner than agreed upon, you would likely have a PAYDEX score of 81. As the system expands it doesn't follow this pattern precisely but you get the general idea. To attain the highest PAYDEX score of 100, you must pay bills 30 days sooner than the agreed upon terms. However, a score of 80 is considered to be a very good credit risk since it shows that you do not make late payments.