Business Credit Scores: What You Need To Know

Just like consumers have credit scores that financial institutions often refer to before approving loan and credit applications, businesses have a similar facility that allows lenders an easy way to evaluate creditworthiness.  A number of these companies have launched over the past several years, although Paydex from Dun & Bradstreet continues to be the single major source for business credit reporting.

Instead of accounting for a wide variety of factors, the Paydex uses a single indicator to determine your business’ credit ranking:  how well your business is able to timely payments under the agreed-upon terms.  Scores are presented as a single number from 0 to 100, with any business ranking above 80 considered a “low-risk” investment for creditors.

To begin establishing a credit score with Paydex, you will need to get a D-U-N-S number from D&B (the company behind Paydex), a unique nine-digit sequence that is used to keep track and identify hundreds of millions of businesses worldwide.  Once you’ve gotten a D-U-N-S number, you can use that to establish a small line of credit with suppliers (such as office supply companies) to get you started.  Make sure that all suppliers you work with report their transactions to D&B.  Otherwise, you won’t earn any credit for the business you do with them.

Once you have a Paydex account, it is important to keep it active.  Since Paydex regularly tracks your business with suppliers and creditors, an inactive account likely means business is a little sleepy.  Even when you have scores well above 80, inactivity will cause it to drop.  Come time you actually need to make a loan or get a business credit card, you’ll end having a difficult time.