The Impact of Your Credit Behavior Score

In the modern landscape of finance, your behavior score holds significant sway over your ability to access credit, secure favorable interest rates, and even land certain job opportunities. Understanding what this score means and how it can affect your life is crucial for navigating the complexities of personal finance - and in this blog, the receeve team will help you do just that.

Introduction to behavior score

What is a behavior score?

Your behavior score, often referred to simply as a “credit score”, is a numerical representation of your creditworthiness, as this page from UK bank Lloyds shows. It reflects your history of borrowing and repaying funds, as well as your overall level of financial responsibility. A wide range of the people and organizations you interact with daily may assess your score to evaluate your overall reliability and trustworthiness - and make decisions about you based on what they see.

Its importance in financial transactions

Whether you're applying for some form of credit, looking to pay a sum of money owed, or even something that may seem unrelated to finance like applying for a job, your behavior score plays a pivotal role in the decision-making process that’s based on these actions. A high score indicates to the powers that be - such as lenders, collections agencies or potential employers - that you are low-risk. This suggests that you’re more likely to meet your obligations to them, and means that you’re more likely to receive favorable terms.

What aspects of your finances can this score affect?

The likelihood of your credit applications being accepted

Lenders use your behavior score to assess the risk associated with lending you money. A higher score increases the likelihood of your credit applications being approved, while a lower score may result in rejections or other negative consequences, such as the following:

The level of trust a creditor is willing to extend to you

A high behavior score instills confidence in creditors, leading them to offer you higher credit limits and more favorable terms. Conversely, a low score may lead to lower credit limits and stricter borrowing conditions.

The approaches or tactics that collections agencies are likely to employ

If you fall behind on payments and your accounts are sent to collections, your behavior score can influence the techniques and strategies used by collections agencies to recover the debt. A lower score may result in more aggressive collection efforts, but a higher score is more indicative of responsibility amidst temporary troubles, and a collection agency is more likely to leave you to use things like customer payment portals rather than chase you.

Interest rates

Your behavior score has a direct impact on the interest rates you're offered on loans and credit cards. As Experian outlines here, lower scores typically translate to higher interest rates. In the same vein, a higher score can mean a lower interest rate too, saving you money over the life of the loan.

Insurance premiums

Insurance companies often use behavior scores to assess the risk of insuring an individual. A higher score may result in lower insurance premiums, as it indicates a lower likelihood of filing claims.

Employment opportunities

Some employers may review your behavior score as part of the hiring process, particularly for roles that involve financial responsibilities or require a security clearance. A high score can enhance your employability and may even lead to better job prospects and higher salaries.

How behavior scores are used in debt collections

We’ve already seen how your behavior score can affect how collections agents interact with you, and that’s because behavior scores are used in collections too. The goal of doing so is to identify the approach to repaying any money you owe that will work best for you - making it easier for you to meet your obligations. Of course, the primary objective of a collections agency is to recover owed funds. However, in today's context, collection agents understand that fostering a positive relationship and collaborating with debtors significantly enhances the chances of repayment.

One of the ways they might use a behavior score is to create a debtor profile and identify what type of debtor you are. This is a plus point for you because it helps them to identify your inclinations and preferences when it comes to repayments, and how you like to be approached about them.

One of the tools they might use to create such a report is receeve’s behavioral credit scoring tool. Like the other tools and functionalities that make up the receeve debt collections platform - features such as the case manager, debt partner manager), and wide scope for data analysis and reporting - behavioral credit scoring is highly reliable, and identifies debtors’ tastes with a high degree of accuracy. To learn more about how it works, why not check out this blog next, or to learn more about receeve or any of the specific functionalities mentioned in this section, click the relevant link!