Using an expanded view of credit data allowed collection agencies and debt buyers to increase their recovered dollars by up to 9%, according to a new study. To determine the impact of expanded credit data, which includes balance, payment and credit limit, TransUnion analyzed more than 40 million accounts from 15 collection agencies and debt buyers.
The analysis included a variety of debt types, including credit card, medical, student loan, telecom and utility debts, and defined “recovery" as $50 or more collected within 12 months. The new recovery model was built using, where available, up to 30 months of historical information on each loan account, actual payment amounts and an increased number of prior addresses.The TransUnion study looked at the credit bureau’s own CreditVision recovery model. It showed, compared to a traditional recovery score, that CreditVision yielded an average of 3% increase in the number of payers."As the economy continues to recover, collection agencies and debt buyers need a broader and fresher data set that is representative of recent economic conditions," said Peter Ghiselli, vice president in TransUnion’s specialized risk group. "This new recovery model is built on current consumer credit data to incorporate the evolving credit landscape, allowing collectors to see a substantial improvement in the number of payers and dollars recovered."The study found that TransUnion's recovery model had a great impact on the top 10% of collection accounts in the credit card market. Compared to traditional recovery models, the new recovery score helped collection agencies and debt buyers recover on average 13% more dollars and receive up to an 11% increase in number of payers from the top tier. While traditional models allowed collectors to recover up to 91% of dollars for the top half of debtors, the new model delivers an average of 96% dollar recovery rate."For collection agencies and debt buyers, every dollar recovered is important, but collectors need to prioritize accounts that have a higher likelihood to pay," said Ghiselli. "With the new recovery model, collectors have greater insights into account history, actual payment amounts and other important credit factors to maximize both recovered accounts and recovered dollars."With up to 30 months of historical information on each loan account and actual payment amounts, the new TransUnion recovery model is the first of its kind to add enhanced credit data from CreditVision.
The expanded view of data helps collections agencies identify behaviors to determine payment patterns. The model also allows collectors to access data and set account strategies prior to contacting a debtor.