Foolproof: Decoding Dun and Bradstreet Business Credit Report

Do you need help decoding your Dun and Bradstreet business credit report? Not to worry: we can help you with your D&B credit report.

For businesses, one of the big credit reporting agencies is Dun & Bradstreet, as their PAYDEX score of your company can be the reason why your business gets credit – or it doesn’t.  You need to keep on top of your PAYDEX score, as with all of your other business credit scores. D & B provides a sample report and even some higher level guidance in how to interpret it. Here, we’ll go over the sections in turn.

Dun & Bradstreet Business Credit Report: D&B Reports

A Dun & Bradstreet Report (also known as a D&B Report) is a database-generated report. The business services giant produces such a report in order to help its clients in making decisions regarding new credit applications.

The primary reason for a client making use of this kind of a report is to engage in credit risk monitoring of merchants, suppliers, and business partners. This assists companies make informed business credit determinations and steer clear of bad debt.

Dun & Bradstreet takes several factors into account in developing such a report. These include a predictor of payment delinquency; how financially stressed a company is versus similar businesses; an evaluation of supplier risk; credit limit recommendation; D&B rating; and PAYDEX score. Let’s consider all these factors in turn.

Dun & Bradstreet Business Credit Report: Sample D & B Report

Dun & Bradstreet Business Credit Report: Header

As you might expect, the report starts off with basic identifying data such as company name and address, and the date of the report.

Dun & Bradstreet Business Credit Report: Executive Summary

Here, D & B includes the company founding date and the number of employees.  This section includes working capital, sales, and net worth.

D & B Rating

The report contains two graphs:

• Financial strength
• Composite credit appraisal

The report defines the terms next to the graphs.

A D&B Rating is designed to help companies quickly assess a business’s size and composite credit appraisal. The rating is based on information in a company’s interim or fiscal balance sheet, and also an overall evaluation of the firm’s creditworthiness.

Rating Classifications

5A to HH Rating Classifications show company size based on worth or equity as computed by Dun & Bradstreet. The figure is important because a company’s size can be a reliable indicator of credit capacity. Dun & Bradstreet assigns such ratings to businesses which have supplied a current financial statement.

D & B PAYDEX

Here the report has two more graphs:

• Up to 24 months D & B PAYDEX – this shows when your company pays its debts and compares that to the industry average. Payment dates are divided into greater than 120 days slow; 30 days slow; prompt; and anticipates. Naturally, you want your business to be somewhere between prompt and anticipates.
• Up to 3 months D & B PAYDEX – this shows the same data and the same divides although there is no comparison to the industry average.

Predictive Analytics

There are two more graphs in this section:

• Financial stress class – compares failure rates to similarly stressed companies.
• Credit score class – compares payment dates to similar companies to show delinquency percentages.

Credit Limit Recommendation

This graph splits up risk category into high, medium, and low.

Dun & Bradstreet Business Credit Report: D & B Viability Rating

This more complex graph shows the following:

Viability Score

This is from high risk to low risk.

Portfolio Comparison

And this is from high risk to low risk.

Data Depth Indicator

So, this is from descriptive to predictive (this measures how much information D & B is basing its report on).

Company Profile

This includes:

• Financial data – whether available.
• Trade payments – whether available.
• Company size – such as large.
• Years in business – such as ‘established’.

Dun & Bradstreet Business Credit Report: Business Information

Business Summary

This section has Standard Industrial Classification (SIC Codes) and North American Industry Classification System (NAICS Codes).

Credit Capacity Summary

There are two graphs in this section:

• Financial strength – shows cash amounts.
• Composite credit appraisal – divides into limited, fair, good, and high.

This portion also includes the prior D & B rating and recent payment activity, including average high credit, highest credit, and total highest credit.

D & B Viability Rating

This is another complex section. Fortunately, Dun & Bradstreet provides definitions next to the four graphs:

• Viability score – high risk to low risk, compared to all businesses in the D & B database.
• Portfolio comparison – high risk to low risk, compared to all businesses in the same model segment.
• Data depth indicator – a measure of how much information D & B has to go on, in their database.
• Company profile – very basic data on company size and years in business.

Composite Credit Appraisal

This is a number, 1 through 4, and it comprises the second half of a firm’s rating. It reflects Dun & Bradstreet’s overall assessment of that business’s creditworthiness. Dun & Bradstreet’s analysis of company payments, financial information, public records, business age and other important factors, when available, are interpreted in order to generate a Composite Credit Appraisal.

When a company does not supply current financial information, they cannot get a Composite Credit Appraisal rating of better than a 2. Moreover, the 1R and 2R Rating categories indicate company size based on the total number of employees for the business.

These rating categories are assigned to company files which do not contain a current financial statement. Employee Range (ER) Ratings apply to certain lines of business not lending themselves to classification under the D&B Rating system. These kinds of businesses are assigned an Employee Range symbol based upon the number of employees and nothing more.

As a whole, when Dun & Bradstreet does not have all of the information they need, they will signify as much in their reports. However, the absence of some pieces of information does not necessarily mean a certain firm is a poor credit risk.

Dun & Bradstreet Business Credit Report: Business History

This part has narrative information about the company, including the name(s) of its officer(s) and director(s), along with any affiliate information, if applicable.

Dun & Bradstreet Business Credit Report: Business Registration

In this part, the report reveals where the business incorporated and the date of incorporation along with the corporate registration ID.

Dun & Bradstreet Business Credit Report: Government Activity Summary

This section is mainly concerned with whether the business might be considered for socioeconomic programs, such as whether it is minority-owned or is considered a small business.

Dun & Bradstreet Business Credit Report: Operations Data

The part contains basic company information like the business you are in, the net payment terms you have with creditors, number of employees, the type of facilities you have, and where the facilities are (e. g. within a business district or the like).

Dun & Bradstreet Business Credit Report: Industry Data

This section includes the SIC and NAICS codes for your company.

Dun & Bradstreet Business Credit Report: Family Tree

Branches Domestic

Your main branch is here; if you only have one office, then it’s here.

Subsidiaries Domestic

If your company has any subsidiary offices, they are here.

Dun & Bradstreet Business Credit Report: Financial statements

Three Years Comparative Statement

This section compares various data points for the past three years, such as current assets and liabilities.

Key Business Ratios

Here, the report compares your company to its industry median and the industry quartile when it comes to particular data points, such as short term solvency and assets sales.

Most Recent Financial Statement

This section contains detail on current assets, non-current assets, current liabilities, and non-current liabilities.

Dun & Bradstreet Business Credit Report: Indicators

Public Filings Summary

This section summarizes any judgments, liens, suits, and UCC filings your company has.

Public Filings

This section provides a bar chart based on the previous section.

Dun & Bradstreet Business Credit Report: Full Filings

Judgments

Here are the details regarding any judgments against your company.

Liens

Here are the details regarding any liens against your company.

UCC Filings

Here are the details regarding any UCC filings impacting your company.

Dun & Bradstreet Business Credit Report: Commercial Credit Score

Summary

Here is a graph from high to average to low for your company’s credit risk.

Incidence of Delinquent Payment

This part compares your company’s delinquent payment history to similar companies.

Dun & Bradstreet uses predictive models to ascertain how likely a company is to be overdue with its payments. Predictive scoring is a means of using historical information in order to try to predict future outcomes. It involves identifying the risks inherent in a future decision. It does this by examining the relationship between historical information and the future event.

This represents an objective and statistically derived counterpart to subjective and intuitive analyses. Such scoring allows a business to rank and order accounts based on the probability of an event occurring, such as delinquent payments. However, note that Predictive Scoring only exemplifies a statistical probability, and not a guarantee.

Credit Score Percentile Norms Comparison

This section graphs your company’s credit score as opposed to similar companies.

Dun & Bradstreet Business Credit Report: Financial Stress Score

Dun & Bradstreet generates Financial Stress Scores to forecast the possibility of business failure over the upcoming twelve months. D&B defines business failure as a company which gets legal relief from its creditors; ceases its business operations without paying all of its creditors in full; voluntarily withdraws from its business operations thereby leaving unpaid obligations; enters into receivership or reorganization; or makes some kind of arrangement for the benefit of its creditors, based upon the information found within D&B’s commercial database.

The score ranges from 1,001 to 1,875. A score of 1,001 stands for the highest probability while a figure of 1,875 represents the lowest probability of business failure.

Summary

This graph contains your company’s financial stress class from high to average, to low.

Financial Stress Risk Class

This is a segmentation of the scored universe into five distinctive groups, ranging from 1 to 5. A 1 represents businesses which have the lowest probability of failure, while a 5 represents firms which have the highest probability of failure.

This Class makes it so a customer can quickly segment their new and existing accounts into various risk segments. This is to identify suitable marketing or credit policies. For any businesses showed as being Discontinued at This Location; Higher Risk; or Open Bankruptcy, those records automatically get a 0 score.

Financial Stress Score Percentile

And this section has the probability of failure of your business.

A Financial Stress Score Percentile is shown as a 1-100 ranking where a 1 percentile has the highest probability of failure and a 100 percentile has the lowest probability of failure.

A financially stressed company is characterized as a firm which has discontinued operations following assignment of bankruptcy; voluntarily withdrawn from business operation leaving unpaid obligations; discontinued operations with loss to creditors; or is in receivership or reorganization, or has made some sort of an arrangement for the benefit of its creditors.

Financial stress percentile comparison

This section paints a picture of your company’s financial stress percentile versus similar companies.

The Financial Stress Percentile compares the company in question to other businesses in the same location, industry, number of employees, or number of years in the business. Financial Stress Score Norms show an average score and percentile for all firms with similar demographic characteristics. These Norms can be utilized in order to measure where this particular business stands in relation to the norm for its peer group.

Supplier Evaluation Risk Rating

The Supplier Evaluation Risk Rating (also called a SER Rating) calculates how probable it is that a company will get legal relief from its creditors or terminate its operations without paying creditors in full over next twelve months. The SER rating comes from D&B’s Financial Stress Score. The Financial Stress Score percentile serves as the basis for the SER Rating.

Once the Financial Stress Score percentile is determined for a company, a second set of rules are applied to figure the SER Rating. The SER Rating provides a probability of global supplier failure. Local nations’ failure ratings are indicated via a Class of 1 – 9. A 1 represents businesses with the lowest probability of supplier failure. A 9 represents companies with the highest probability of supplier failure.

Dun & Bradstreet Business Credit Report: Advanced PAYDEX + CLR

D & B PAYDEX

There are two graphs in this part:

• Up to 3 month D & B PAYDEX – Payment dates are divided into greater than 120 days slow; 30 days slow; prompt; and anticipates.
• Up to 24 month D & B PAYDEX – this graph shows the same scale.

Credit Limit Recommendation

This graph splits your business’s risk category into high, moderate, or low.

A D&B Credit Limit Recommendation includes two recommended dollar guidelines:

1. A conservative limitation, recommending a dollar benchmark if a company’s policy is to extend less credit to minimize risk and

2. An aggressive limit, proposing a dollar benchmark if a firm’s policy is to extend more credit with possibly more risk.

These dollar guideline amounts are based on a historical evaluation of the credit demand of customers in the U.S. payments database who have a similar profile to the business being evaluated, with respect to employee size and industry. The guidelines do not address if a particular business can pay that amount or if a particular customer’s total credit limit was achieved.

Each set of limits comes with an analysis of the risk category a business falls into, or D&B’s assessment of how likely they are to continue to pay their obligations within the agreed-upon terms and how likely they are to go through financial stress in the next twelve months.

PAYDEX Yearly Trend

Then this line graph encapsulates your company’s PAYDEX scores compared to the primary industry for the last four quarters.

A PAYDEX Score is Dun & Bradstreet’s proprietary dollar-weighted numerical indicator of how a company has paid its bills over the past year. The score is based upon trade experiences reported to Dun & Bradstreet by various vendors. In addition, the D&B PAYDEX Score ranges from 1 to 100; higher scores signify a better payment performance.

Payment Habits

Here the report indicates your business’s percentage of payment within terms divided by various dollar ranges.

Payment Summary

The section contains some detail on the payment experiences D & B has on file for your business. This shows how quickly your company paid off its debts, how much credit was extended, etc.

Detailed Payment History

Now, this section expands upon the prior one by adding report dates, paying records, selling terms, and the like.

Get your own D & B PAYDEX report

You will have to look at your own PAYDEX report in order to get a handle on your company’s financial health.

You can get your PAYDEX report here and you can contact their Customer Service department (it’s a part of Dun & Bradstreet, as they also generate PAYDEX reports) here. D & B’s PAYDEX Customer Service phone number is here.

Takeaways: D&B Data

Finally, any report is only as good as the data it comes from. Dun & Bradstreet’s database includes over 250 million companies spanning the globe, which includes around 120 million active firms and about 130 million companies which are out of business but kept for historical reasons.

D&B constantly gathers data and works to improve its analyses to assure the greatest degree of accuracy possible.

Improving Your D & B PAYDEX Report

Now that you understand what goes into it, the main areas that Dun & Bradstreet reports on are delinquencies amounts and time frames, amount of credit utilized, business history (e. g. time in business), and judgments and liens.

By keeping your credit utilization within reason (less than 30% of your total available credit is best), clearing your debts as fast as possible and avoiding delinquency and late payments, and also accumulating some time in business, you should be able to improve your D & B PAYDEX score over time. You can get better PAYDEX scores! Check out how this will help your company!