Dun and Bradstreet has always been at the forefront in providing commercial information on businesses, thus, becoming one of the world’s most popular and trusted credit reporting agencies.
D&B’s primary job is to provide an in-depth and thorough evaluation of a company’s financial stability. It comprises necessary scoring, payment and financial information based on company size, real properties owned and financial net worth, allowing businesses to review a completely assessed credit profile that will help them arrive at a decision.
D&B’s Credit Score is a prediction factor to know if a business will fail to pay its bills under a credit transaction with a period of 12 months. A business is said to be severely delinquent when at least 25% of its payments are slow and at least 10% of its payments are past due in over 90 days. The credit score also dictates the probability of a business to obtain legal relief from creditors or worse, cease operations without bills settlement.
D&B’s Credit Score ranges from 101-670, where a score of 101 indicates the highest probability of severe delinquency, and a score of 670 indicates the lowest probability of severe delinquency.
D&B Credit Ratings
Through D&B credit ratings, companies are given the opportunity to check the status of commercial entities they wanted to transact business with.
A rating is a category of scores ranked by order. It is meant to provide a quick overview of the credit transaction risk experienced with a customer.
Financial Strength Rating is an indicator of a company’s tangible net worth or its paid-in capital, thus, the formula:
Net worth = Paid-in Capital + Reserves + Retained Earnings – Intangible Assets
Risk Indicators range from 1 to 4, where 1 indicates minimal risk and 4 indicates significant level of risk.
D&B Paydex Score
According to D&B, “The D&B PAYDEX Score is D&B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on trade experiences reported to D&B by various vendors. The D&B PAYDEX Score ranges from 1 to 100, with higher scores indicating better payment performance.”
The Paydex Score is the business credit score equivalent to your personal FICO score.
It is a notable factor when seeking to get financing necessary to start or expand your operations. Failure to manage one’s Paydex Score could mean bad news to your business.
The higher the Paydex score, the better. A score above 75 shows a good standing. Many business owners are able to get to this level when they have six vendors that are reporting at least $15,000 in revolving credit.
Credit Scores and Ratings are significant aspects that make up D&B’s comprehensive report on a business. They are the principal basis to ensure effective credit risk management processes.
For more great credit tips and news tune in to The Graceful Credit Show live every Sunday at 3:00pm EST on WCHB News Talk AM 1200.
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Sources:
http://www.biia.com/cci_industry_news/Ratings%20Perspective%20FINAR%202007.pdf
https://www.dnb.com/ecomp/help/scores.htm
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