How Business Credit Bureaus Work

Dun & Bradstreet is the oldest and most widely referenced business credit bureau in the United States. Their primary identifier is the DUNS Number, a nine-digit code assigned to each business entity. It's free to obtain and required for many federal contracts under the Federal Acquisition Regulation.

The PAYDEX Score

The PAYDEX score ranges from 0 to 100 and is a dollar-weighted average of how promptly a business pays its bills. "Dollar-weighted" means that larger payment amounts carry more influence on the score than smaller ones. A $10,000 invoice paid late will affect the score more than a $500 invoice paid early.

To generate a PAYDEX score, D&B requires at least two trade payment experiences in their system. These experiences must be reported by vendors or creditors who participate in D&B's data collection program. A business that pays all its bills on time but whose vendors don't report to D&B will have no PAYDEX score, not a good one.

A score of exactly 80 represents payment on the due date. Scores above 80 indicate early payment. Scores below 80 indicate late payment, with the specific number reflecting how many days beyond terms payments typically arrive.

The Business Information Report

D&B's Business Information Report (BIR) contains several components beyond the PAYDEX score. These include the D&B Rating, which combines an estimated financial strength indicator with a composite credit appraisal. The financial strength indicator is based on net worth or equity when available from financial statements, or on number of employees as a proxy when financial data is not available.

The report also contains a payment trend summary, a list of trade payment experiences, public record information including liens, judgments, and bankruptcies, and business background information such as year started, number of employees, and SIC codes.

Supplier Evaluation Risk Rating

The SER Rating predicts the likelihood that a business will cease operations without paying its obligations in full. It runs from 1 to 9, with 1 representing the lowest risk. This is separate from the PAYDEX score and is used by companies evaluating potential suppliers rather than extending credit.

Equifax Business credit reports and scores are less commonly discussed than D&B or Experian, but they are used by a significant number of lenders and creditors. Equifax maintains its own database of business credit information and produces several distinct scores.

Business Credit Risk Score

Equifax's Business Credit Risk Score predicts the probability that a business will become severely delinquent on its credit obligations within the next 12 months. The score ranges from 101 to 992, with higher scores indicating lower risk. The factors that affect it include payment history, the age of the business, the number of credit accounts, and public record information.

Business Failure Score

The Business Failure Score is a separate product that predicts the likelihood of business failure within the next 12 months. It ranges from 1000 to 1610 and incorporates different variables than the Credit Risk Score. Equifax uses this score primarily in contexts where the concern is not just late payment but actual business closure.

Payment Index

Equifax also produces a Payment Index, which is similar in concept to D&B's PAYDEX in that it reflects payment timing relative to terms. It runs from 0 to 100 and is based on trade payment data reported to Equifax by creditors.

Data Sources

Equifax draws from banking data, trade credit data, and public records. Their business credit database includes information from financial institutions that is not typically available to D&B or Experian. This means a business's Equifax profile can look different from its D&B or Experian profile even when the underlying payment behavior is identical.