Why Is Credit Reporting Important?


Does credit reporting significantly increase collections?

Credit reporting does benefit collections, but its overall impact is not well documented.  Credit reporting’s impact on collections is more anecdotal (somebody wanted to buy a house so we got paid), and probably grossly overestimated.  Most collection agencies report to the credit bureaus.

If credit reporting magically collected money, collection agencies reporting 100% of the debt referred to them would be liquidating at phenomenal rates.  However, ACA International, the leading trade association representing credit and collections professionals, reported in 2008 that just 18% of all money referred to collection agencies is eventually recovered.  Based on our experience with clients, collection agencies often liquidate rental debt at substantially lower percentages.

Credit reporting is just one tool to collect money; it should be done carefully, and at the right time to avoid significant potential legal liability, and only after other significant efforts to collect have been made. Credit reporting should never be used as a substitute for continuous work effort.  Hard and consistent work effort, focused by constant analysis of debt to deploy multiple treatments of debt, including legal treatment, always outperforms front-end credit reporting collection models.