What is the D&B Rating?

If you’re a business owner, you’ll want to build a solid business credit rating so that you can access capital at affordable rates. One of the three major players in the business credit realm is Dun & Bradstreet (D&B), which has its own methodology to gauge a business’s ability to borrow money and repay debt. As an entrepreneur, you’ll want to know exactly how that model works before you apply for business loans or credit lines.

What is the Dun & Bradstreet business credit profile?

The D&B credit report gives creditors a much more comprehensive picture of a company’s creditworthiness than just a numerical score, but a number does factor into the equation. The agency uses a representation called a PAYDEX score, which ranges from 1 to 100, with higher numbers reflecting better credit standing. 

Before you can get a PAYDEX score, D&B will need to assign your business a Data Universal Numbering System (D-U-N-S) number that acts as a unique identifier. Once you’ve picked up the free number, you’ll want to assure that activity is being reported to D&B, as that passage of information doesn’t always happen if your creditors don’t take the initiative.

Your business’s credit rating with D&B will have more than just a PAYDEX score attached to it. The bureau also hands out a classification based on your financial strength, which mostly relates to the size of your company. These scores range from 5A (a company worth $50,000,000 or over) to HH (a company worth up to $4,999). A composite credit assessment also metes out a number from one to four (with one being the best score) that accounts for your payment history and the strength of your financial statement, had you provided it to D&B.

Keep in mind that any business can search your credit history by engaging the services of D&B — for a fee. This means it’s crucial to stay on top of your game so your score is as high as possible.

How is the rating calculated?

Since your standing as a potential borrower depends as much on payment history as it does on your future ability to pay off debt, D&B takes a number of variables into creating a business credit rating model. In addition to the PAYDEX score and measure of financial strength, the company offers a comprehensive analysis for borrowers who need to base their lending decisions on more than just a number.

Creditors know that past experience doesn’t necessarily predict future results. With that in mind, D&B adds some predictive models to its range of services:

  • A delinquency predictor score forecasts the probability that a company will pay late on debt obligations or cease operations within the next 12 months.
  • A failure score indicates the chances of a company facing some type of financial stress over the coming 12 months.
  • A viability rating projects the odds of a business becoming insolvent or shutting its doors in the next 12 months.

All three predictive models include a percentile, a class and a raw score that gives three different pictures of a company’s future ability to repay a debt. Rather than predominantly relying on a single number that reflects past payment performance, D&B offers a multi-dimensional look at a business’s standing by evaluating both public and private data. In addition, any organization wishing to bolster its credit stance can submit statements exhibiting revenue, assets, liabilities, etc.

What does the rating mean for my business?

As a business owner, your departmental duties are numerous. Not only must you remain vigilant over sales, marketing and operations, but you’ll also need to make certain your finance team helps you maintain a leg up. Part of that competitive advantage involves staying fiscally viable and being able to use debt as a financing tool. But a great business credit rating is not just incumbent on your accounts payable department to make timely payments on loan and credit cards. From top to bottom, D&B views your company’s overall financial picture in calculating a credit rating that could have a significant impact on your future success.

At a more granular level, a strong credit rating with D&B can help your bottom line. You may apply for a $200,000 small business loan at a lender of your choice. That bank or financial entity will do its own assessment of your business model and finances, but by pulling your D&B credit report, they can see that you’ve been in business for three decades, always paid creditors on time and hold a strong cash position with low balances on loans and credit cards. Under these circumstances, a loan at 8% versus a loan at 12% saves you about $442 monthly and $53,144 in total over a 10-year term. Furthermore, if you can secure cash back or travel rewards credit cards, you can reap percentage savings on business purchases or gather lucrative incentives toward airfare or hotel bookings. That’s how the figurative rubber effectively meets the road. 

The bottom line

A solid Dun and Bradstreet credit rating is a very valuable endorsement for your business. With more than 225 million companies in the fold across more than 200 countries, D&B is one of the leading business credit agencies in the world. As always, you’ll need to do your part by paying bills on time and encouraging your creditors to report that activity to D&B and all the other major credit bureaus. Establishing a profile with this bureau will help assure that you can put your best foot forward when seeking business financing and also allow your organization to make prudent decisions when extending credit terms of your own. 

Thom Tracy

Thom Tracy is a writer and consultant with 28 years of experience in the insurance and financial services industries.