A paydex score is much like a FICO score: it shows the state of your business with respect to credit. Your FICO score is the most widespread credit score in the United States; it's what banks and other lenders look at to see if you are worth the risk of lending money to. When a bank looks at your FICO score, they're trying to assess the risk you pose. If you have a bad FICO credit score, then you'll end up displaying the image that you don't pay your bills, and the bank won't want to give you their money.
The same goes for a Paydex score. Your paydex score is much like a FICO score, but it's specifically targeted toward measuring business credit. Your paydex score can seriously affect your business by altering the kinds of loans that are available to you. In order to get your business running successfully, you'll need good financing, and your paydex score can be crucial to that funding, because it represents your credit history.
The paydex score is rated on a scale from 1 to 100, and you want to get your business as close to 100 as you possibly can. That means paying your bills ahead of time.
Wait - paying bills ahead of time? I thought corporate credit meant that you could pay your bills later, and enjoy the goods and services you buy now.
Yes, corporate credit allows you to wait a while before paying, and you don't usually run into any huge interest payments if you're paying all your bills on time. But if you expect to get a high rating on your paydex score, you're going to want to start paying all of your bills before other companies charge you for their goods and services. That's because the paydex score isn't based on paying on time; it's based on paying in anticipation. If you want to show that your business really has a good credit history, a 100 score on your paydex score will show that you're paying things before people even ask you for the money. Nothing will inspire confidence from a lender faster than knowing that you're the kind of business that doesn't even wait for their creditors to ask for the money back.
The paydex score is divided into such terms as "anticipate" (meaning that you anticipate payment of your debts,) "discount" (meaning that you pay your debts within the corporate credit discount period,) "prompt" (meaning that you pay all your debts promptly,) and then moves on to however many days you usually pay beyond the terms of your corporate credit agreement. The fact that "prompt" is only placed at a score of 80 out of 100 should show you how strict this particular scoring system is. When paying all your bills on time only gets you an 80 percent, you're really going to have to give it your all in order to get close to 100.
While it is important to use your paydex score properly in order to help find a good business loan, there are creditors who don't require a paydex score. These creditors may be a good place to start, and they can help you build your business credit by providing you with the corporate credit you need in order to establish a paydex score.
The most important take-home message, of course, is to use your credit lines responsibly. While it can be tempting to treat a line of credit as a freebee, you should be aware that you still have to pay for what you buy on credit. By forming the habit of paying for your credited purchases before your creditors even request payment, you can keep yourself in good standing with lenders and keep yourself out of serious debt.
Corporate Credit Concepts specializes in "KEY PHRASE". For more information about "KEY PHRASE" and how it might benefit your business, please CLICK HERE for a free phone consultation.