D&B stands for Dun & Bradstreet, a financial services company that provides credit ratings for businesses of all sizes. The rating helps other companies decide whether they want to work with your business and how big a contract, credit line or loan they want to give you.

Three Characters That Describe Your Business

A D&B rating has three characters. The first two estimate your business's net worth or equity, because bigger companies are considered more creditworthy than small ones. The third is the composite credit appraisal, a score of 1 to 4 that shows D&B's assessment of your financial reliability. A ranking of 5A1 is the highest score. HH4 is the lowest -- it means your company does less than $5,000 in business each year and that you pay your bills late or not at all. The company size is based on a financial statement that your company provides to D&B.

Business Size Matters

In the size rating, companies worth $500,000 or more are numbered 5A to 1A. Five is highest, one is lowest. All are rated A. Businesses smaller than $500,000 are ranked by two letters. The first letter, B to H, shows the broad size category. C, for instance, stands for $75,000 to $199,000. The second letter splits the size category in two. CC stands for $125,000 to $199,000 and CD for $75,000 to $124,999. Categories E through F are too small to split; the letters are doubled. Businesses that don't provide financial documents are rated 1R (10 or more employees) or 2R (fewer than 10).

Credit Ranking

The composite credit score, a single number, ranks your business from 1 to 4 based on D&B's assessment of your business's creditworthiness. One is the highest; it's for businesses that pay their bills on time or early. Four means the business is likely to go bankrupt and take its creditors' money with it. If you have not given D&B any financial statements, your business will rate a 2 at most. Otherwise, D&B's methods are proprietary. The company won't tell you precisely how a rating of 2 differs from a rating of 3.

How D&B Decides a Score

A D&B report, as opposed to the three-character rating, does show some ways that D&B gauges a company's financial risk. One is a "viability" rating that zeroes in on the likelihood of bankruptcy. Other factors include the age of the business and information from public records. Probably the most telling number in a report is the Paydex score, a days-to-payment rating based on "trade experiences reported ... by various vendors." It rates how long a business has taken to pay its bills, from 100 for companies that pay early down to 1 for companies that have lots of delinquencies.

Time-to-Payment Score

Ratios in a Paydex days-to-payment score include a "satisfactory payment experiences" to total payment experiences and the proportion of late payments, with late payments split by number of days, according a credit industry association. Another ratio is past due balances to total balances. There are many more. The score includes dollar weighting. A delinquent bill for $50 is bad in a small business, but a delinquent bill for $10,000 is a game-changer. D&B doesn't explain exactly what its dollar-weighting means, though. It is just one of many formulas in D&B's secret tool chest.