What is Dun & Bradstreet (D&B)?
– Short definition: Dun & Bradstreet is a global business-information company that collects, organizes, and sells data and analytics about other companies. Firms use D&B data to assess credit risk, find customers, verify suppliers, and support regulatory or procurement processes.
Key concepts and terms (defined on first use)
– DUNS number (Data Universal Numbering System): A nine‑digit identifier D&B assigns to each business location in its database to link records and support data exchange.
– PAYDEX score: A D&B numeric payment-performance score that runs 0–100; higher is better. Scores of about 80 and above are generally interpreted as low credit risk.
– DPS (Delinquency Predictor Score): A D&B scale from 1–5 that estimates the likelihood of future delinquency; 1 means lower chance, 5 means higher.
– D&B Rating: A two‑part credit assessment combining a Common Credit Appraisal (payment history, public filings, trade data) and a Rating Classification (an evaluation of net worth and balance-sheet strength).
– Data Cloud / DUNSRight®: D&B’s proprietary systems and quality processes that aggregate, clean, and analyze business data.
Short history (high level)
– Origins: The business goes back to the 1840s. Lewis Tappan set up a mercantile credit agency in 1841 that evolved into R.G. Dun & Co. Separately, John Bradstreet founded a commercial ratings firm in 1849.
– Merger and names: The two strands merged in the 1930s to form R.G. Dun & Bradstreet, later shortened to Dun & Bradstreet; the company rebranded as D&B in 2001.
– Recent facts: D&B has evolved into a data‑and‑software provider (Data Cloud, analytics). It returned to the public market in 2020 under ticker DNB. In 2023 the company reported revenues of about $2.3 billion and a net loss of roughly $43.7 million, and it maintains records on hundreds of millions of businesses worldwide.
What D&B does — practical overview
– Data collection and identifiers: D&B assigns DUNS numbers to business locations and links public records, supplier and customer trade payments, corporate family trees, filings, and other signals.
– Credit scoring and risk tools: D&B produces credit- and payment‑behavior metrics such as PAYDEX, DPS, and composite D&B Ratings to help users judge a company’s creditworthiness.
– Commercial products: D&B sells subscriptions, business reports, data licenses, and support services used by sales teams, credit managers, procurement, and compliance functions.
– Use cases: Common uses include screening suppliers, setting payment terms, qualifying prospects, meeting procurement requirements (some government contracts require a DUNS number), and building customer lists.
How the scoring and identifiers are used (practical notes)
– DUNS number: A stable identifier to confirm which legal entity or location you’re dealing with — useful for contracts, procurement registration, and cross‑system matching.
– PAYDEX (0–100): Often used to set trade credit terms. Example interpretation: a PAYDEX around 80 is typically considered low risk; higher scores indicate faster or more consistent on‑time payments.
– DPS (1–5): Used together with PAYDEX to gauge future delinquency risk.
– D&B Rating: Combines payment and financial information to give a fuller credit opinion. Organizations often use it when making lending, vendor, or major contracting choices.
Checklist — if you’re a business owner or credit manager
– Get a DUNS number for each physical business location if you expect to bid for government contracts or need standardized identity.
– Verify your company’s basic public records in D&B’s listing (name, address, phone, legal structure, principals).
– Monitor PAYDEX and DPS regularly; correct or update payment-trade data if it’s wrong.
– Order a full D&B report before entering large supplier or customer contracts.
– Consider a subscription or data license if you need ongoing batch matching or API access for integration with CRM/ERP systems.
– Document sources and keep financial statements current to help the Rating Classification portion of the D&B Rating.
Small worked numeric example (how to read two common scores)
– Scenario: Acme Widgets has:
– PAYDEX = 90
– DPS = 2
– Interpretation:
– PAYDEX 90: On D&B’s 0–100 scale, a 90 suggests payments are made promptly relative to peers — this is usually considered low credit risk.
– DPS 2: On the 1–5 delinquency scale, a 2 indicates a relatively low probability of payment default in the near
near term. Put together: Acme appears to pay on time (high PAYDEX) and shows a low delinquency signal (low DPS), so a credit manager would generally treat it as lower risk than a peer with a low PAYDEX and a high DPS. Remember that both scores reflect historical trade payments and reported data — they are not guarantees.
Practical next steps (how to use these scores in credit decisions)
– Verify identity first: match the company’s legal name, address and D-U-N-S® number to avoid mixing reports for different entities.
– Check score context: compare PAYDEX and DPS to industry medians and to your portfolio’s benchmark. A “good” PAYDEX in one sector may be typical in another.
– Inspect the details: look at the number of tradelines (reported trade references), most recent payment activity, public filings (liens, judgments), and financial statement quality.
– Apply your policy consistently: translate scores into trade terms using a written rule (example below).
– Monitor: set automatic re-checks or alerts for material changes if exposure is significant.
Worked illustrative policy example (numeric, for training only)
Assume your firm’s internal policy maps D&B signals to terms as follows (this is an example — not advice):
– Low risk: PAYDEX ≥ 80 and DPS ≤ 2, no judgments, ≥ 5 tradelines reported → Offer net 30; credit limit = min(5% of annual revenue, 90 days of average monthly purchases).
– Medium risk: PAYDEX 60–79 or DPS = 3, or fewer tradelines → Offer net 15 or COD for first 90 days; credit limit = min(2% of annual revenue, 30 days of purchases).
– High risk: PAYDEX < 60 or DPS ≥ 4 or public filings → Require prepayment, letter of credit, or decline.
Numeric example using the Low-risk rule
– Acme Widgets: PAYDEX 90, DPS 2, 10 tradelines, no judgments, annual revenue $2,400,000.
– 5% of annual revenue = $120,000.
– If Acme’s average monthly purchases from you are $10,000, then 90 days of purchases = $30,000.
– Credit limit under the rule = min($120,000, $30,000) = $30,000. Offer net 30 terms (illustrative).
Red flags to watch for
– Very few or no tradelines: scores may be unreliable for thin files.
– Contradictory signals: high PAYDEX but adverse public records — investigate.
– Sudden deterioration: rapid score drops, new liens, or judgments.
– Business ownership changes, address changes, or multiple D-U-N-S numbers.
How to obtain and maintain reliable D&B data
Step-by-step to get a D&B business credit report
1. Confirm the company’s D-U-N-S number (D&B’s unique identifier).
2. Purchase a single report or subscribe to an API/data feed via dnb.com if you need ongoing screening.
3. Review the full report: summary scores, tradelines, public filings, and financials.
4. Document the report in your underwriting file and date-stamp the review.
5. If you discover errors, contact the business and D&B to request a correction; supply supporting documents.
Ways a company can improve its D&B-related metrics
– Pay suppliers on or before agreed terms; maintain consistent timing.
– Encourage trading partners to report payment experience to D&B.
– Keep corporate registrations, address, and officer information current.
– Supply updated financial statements where D&B asks for them.
– Centralize purchasing and billing so invoices get paid on schedule.
Limitations and caveats
– Scores depend on reported trade activity. Many small, new, or privately held firms have thin files.
– Reporting lag: recent improvements or deterioration may not show immediately.
– Industry and regional differences affect score interpretation.
– No single score replaces a full credit review that includes financial statements, bank references, and commercial knowledge.
Alternatives and complements
– Use other business credit vendors (Experian Business, Equifax Business) as complementary sources; each has different data coverage and scoring models.
– Combine external scores with internal experience (payment history with this customer) and qualitative factors (management quality, customer concentration).
Quick checklist before extending credit
– Confirm D-U-N-S and entity identity.
– Review PAYDEX, delinquency/failure scores, tradelines, public records.
– Compare to industry medians and your internal policy.
– Compute an exposure cap using revenue and historical purchases.
– Document decision, terms, and review schedule.
Educational disclaimer
This content is educational and illustrative. It is not individualized investment, lending or legal advice. Use your firm’s underwriting policy and consult appropriate professionals for specific credit decisions.
Selected references
– Dun & Bradstreet — PAYDEX® and business credit solutions
– Equifax Business — Commercial credit reports and scores: https://www.equifax.com/business/
– Experian Business — Business credit information and PAYDEX-like scores: https://www.experian.com/business/
– U.S. Small Business Administration (SBA) — Guidance on establishing and managing business credit: https://www.sba.gov/
– Federal Reserve Banks — Small Business Credit Survey and research on credit conditions: https://www.fedsmallbusiness.org/