What Is A Good Dun & Bradstreet Credit Score?
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Your business credit score is critical to the success of your small business. Earning a good business credit score makes affordable lending available and tells vendors they can trust you to keep up with payments. A good score for Dun & Bradstreet is between 80 and 100.
Business credit scores work on a different scale than personal credit. So how would you know what is a good Dun & Bradstreet score? We’ll touch on the credit score ranges, the calculation, and how to maintain a good score.
Dun & Bradstreet Credit Score Ranges
Dun & Bradstreet’s PAYDEX credit score ranges from 1 to 100 instead of 300 to 850 like personal credit models.
The best possible score is 100, signifying a very low risk of making a late payment. Your PAYDEX score falls within one of three risk levels depending on your payment history:
- Low Risk: 80-100
- Moderate Risk: 50-79
- High Risk: 0-49
A good business credit score is between 80 and 100. It’s the golden range for vendors, suppliers, and future lenders. It tells them that you’re managing your existing credit accounts well and will likely continue to do so if they approve you for a new credit account.
This is where you’ll get the best interest rates and repayment terms on financing as long as your personal credit score is also in the good to excellent range. Having a score closer to 100 typically means that you’re making your payment obligations on time or up to 30 days early.
Next is the moderate range of PAYDEX scores which is 50-79. This means you’ve made most of your payments on time, but some payments may have been 15-30 days past due. The lower end of this range suggests that you’ve had mild difficulty making payments on time in the past.
It often equates to increased interest rates compared to low-risk credit and you’ll likely have less favorable repayment terms. That doesn’t mean you won’t be able to find small business financing though.
There are still plenty of options available to business owners in the moderate range. Plus you can always improve your PAYDEX score.
Lastly, are the high-risk PAYDEX scores. These range from 0-49 and indicate great difficulty in meeting previous payment obligations. This typically means that your payments are coming 60 days or more past due.
A score of 0-49 will deter vendors, banks, and suppliers from extending credit to you. It’s also a red flag to potential customers or other businesses you work with. If this is where your credit score stands, don’t lose hope. There’s nowhere to go but up!
How Are Dun & Bradstreet Scores Calculated?
Your Dun & Bradstreet scores consist of two parts. Both are calculated differently and both are important.
- D&B Credit Rating (which is also two parts)
- PAYDEX Score
Dun & Bradstreet calculates your PAYDEX credit score using several factors. Your performance in the following categories is ran through an algorithm to determine your D&B PAYDEX score.
- Available documentation
- Credit utilization
- Your business’s payment history
- How you manage trade credit
The main piece of your D&B credit rating is your company’s net worth. A Dun & Bradstreet rating classification associates financial strength with a code of letters and numbers. There are designations for high net worth, below average net worth, and everything in between.
The highest rating is 5A, which indicates a net worth of $50 million and up. The designation of HH is for small businesses with a net worth of up to $4,999. Dun & Bradstreet only assigns a rating classification if you provide current financial statements.
Dun & Bradstreet also classifies creditworthiness with another scale called a composite credit appraisal. This ranking takes the following information into account:
- Payment history
- Number of years in business
- Public Records
- Number of employees
- Financials
Your business is ranked from 1 to 4 with 1 being excellent credit and 4 being limited credit. While providing financial documentation isn’t exactly necessary to have a D&B score, not providing financial documents will limit you to a score of 2 on the composite credit appraisal.
The D&B rating classification and the composite credit appraisal are combined to create a code that represents the financial stability and credit risk that your business possesses.
For example, if your business has a net worth of $100,000 (classification: CC) and is a low to medium credit risk (composite credit appraisal: 2) Your D&B rating would be a CC2.
How Important Is Dun & Bradstreet?
Your Dun & Bradstreet score may be one of the first things potential lenders use to determine whether or not they’ll lend to you and at which terms. It’s also how suppliers establish what payment terms they’ll grant you on purchases.
Essentially it determines how much you’ll pay for access to credit and whether or not you’ll be approved.
Having a good business credit score with Dun & Bradstreet opens the door to multiple opportunities:
- Finance costly expansions for your small business
- Qualify for critical working capital
- Establish long-term relationships with quality vendors and suppliers
- Eligibility for more private and government contracts
How To Maintain A Good Dun & Bradstreet Score
Maintaining a good business credit score with Dun & Bradstreet can seem simple enough. But wrangling your business finances to improve your score might come with its own challenges. There are a few basic ways to maintain a good PAYDEX score.
- Make Sure All of Your Business Payments Are Early or on Time
Being late on payment terms by just one day could result in a negative mark on your credit. The easy way is to set a recurring calendar reminder for your bill payments ahead of the due date.
If your supplier or lender offers this option, you could establish automatic bill payments. Outsourcing your bookkeeping and bill payments to a professional can also be a solution if you have the resources.
- Periodically Check Your Business Credit Report
Creditors aren’t required to report your credit history with them regularly. Ensure all of your payments for each vendor and lender are being reported to Dun & Bradstreet correctly.
Contact any creditors who haven’t reported your payment history or are showing erroneous information. Updating your credit report with current information will help strengthen your payment history and your credit score.
- Manage Your Tradelines Effectively
The way you manage trade-credit accounts such as a business credit card, small business loan, or vendor account helps you build strong business credit when done correctly. Keep your credit utilization rate low on revolving accounts.
Pay creditors on time or early. If you’ve missed a payment, make a plan to get back on schedule. If you need to build your business credit file, open a business credit builder account with CreditStrong.
There’s no hard pull on your credit and you’ll be able to build up to $10,000 of commercial credit. CreditStrong’s business credit builder account reports your monthly payments to three business credit bureaus and saves you money at the same time.
- Keep Your Personal Credit Report Clean
Yes, personal and business finances should stay separated, but there are instances where your personal credit is tied to your business finances.
Some financial institutions use the FICO® Small Business Scoring Service (SBSS) score to assess your eligibility for their loans and credit cards.
This type of FICO® score takes both your business credit score and personal credit score into consideration. While you should maintain both credit reports sufficiently, you may want to learn more about building business credit without using personal credit.
Conclusion
Overall, it’s important to know where your business credit scores stand. If you’re trying to get a business credit card or a loan, it can help you qualify for the best ones. It can also open opportunities to bring in more revenue or work with better vendors.
Having a PAYDEX score in the low-risk range can even mean you’re paying less money in interest over time compared to a business owner with a high risk PAYDEX score. By working your way to an 80-100 business credit score, your business has the best chance of success.
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