Finance

Paydex scores are an integral part of determining business credit reports, specifically D and B reports. They are dollar-weighted indicators that provide lending institutions with an overview of how a firm has paid its bills in the past, and how it will pay its bills in the future. Its an important indicator when it comes to being approved for credit terms or financing.

Paydex is a one to 100 dollar weighted numerical score of payment performance, calculated using up to 875 payment experiences from trade references reported to Dun and Bradstreet. Those who are looking for the perfect Paydex score will find it at 80. This means you pay on time, every time; anything less is considered slow to late in the lending institutions eyes.

Determining Your Paydex Score
So, what goes into determining your Paydex score? If your payment terms to a vendor are 30 days net, on the 30th day after billing your vendor has received your check–right on schedule. A Paydex score above 80 means that you actually pay ahead of the due date. It should be noted that most Paydex scores do not include anywhere near the 875 maximum level of trades reporting to D and B.

Weighted average is another important step in understanding Paydex scores. It typically applies more importance to trades that are reporting a higher dollar amount of extended credit and less importance to trades that are reporting lesser dollar amounts of credit. Five trades for $100 each may report that your company pays 45 days late, but one trade for $20,000 reports that you pay on time; thus, your Paydex score will still be good because the one big trade outweighs the smaller trades.