What is a Credit Profile? receeve Explains

I’m sure we’ve all heard the term by now, but what is a credit profile exactly? In this blog, the experts at receeve will tell you everything you need to know about a traditional credit profile and what they can be used for. In addition, we’ll tell you more about a new behavioural profiling tool we’ve developed, how the profiles it provides differ from traditional reports, and how that difference can be of huge importance to collections teams and agencies. Let’s get started!

What is a credit profile? receeve explains

Let’s just answer the question - what is a credit profile then anyway?

A credit profile in debt collections is essentially a financial snapshot that provides a comprehensive overview of an individual or an entity’s creditworthiness. It plays a pivotal role in determining one's ability to obtain credit and influences the terms and conditions associated with it. Understanding credit profiles is crucial for both creditors and debtors as it sets the foundation for a transparent and informed financial relationship.

What is a credit profile? receeve explains

The components of a traditional credit profile

Credit history

Credit history serves as the backbone of a credit profile. It’s a record of an individual's (or entity’s) borrowing and repayment activities, reflecting their financial behaviour over time. Every credit transaction, from credit card payments to loan repayments, contributes to the credit history. The importance lies in its ability to showcase a person's creditworthiness, helping creditors assess the risk associated with lending.

Credit score

A credit score is a numerical representation of an individual's creditworthiness. It condenses the information and insights that can be understood from the credit history and turns them into a number, making it easier for creditors to assess risk quickly. The higher the credit score, the lower the perceived risk, and vice versa.

What is a credit profile? receeve explains

The traditional role of traditional credit profiles

Understanding the impact of credit profiles on the debt collection process is crucial for both creditors and debtors alike. When debts are not paid on time, it negatively affects the debtor’s credit profile, making it challenging for those borrowing to secure future credit. At the same time, they can also make it easier for reputable borrowers to secure credit, acting as a form of proof that sends the message “this client will pay you back”’.

For creditors, that reassurance is a key asset, as it helps to accurately assess the creditworthiness of any given current or potential client, thereby protecting them from lending money to individuals or organisations that are not likely to return it, and getting into financial trouble themselves as a result.

What is a credit profile? receeve explains

What is a credit profile from receeve doing differently?

receeve is a proven name in the debt collections industry. Our debt collections software platform and the features within it - like our drag-&-drop strategy builder, debt partner manager, and customer payment portal - are already known and trusted by a number of businesses and collections teams globally. Even better, our proven features will soon be joined by a new behavioural scoring tool.

This new tool can be used for debtor profiling, but it differs from the traditional report in that it is designed for a slightly different result. Instead of answering the question “Should I lend to this person?”, our behavioural scoring tool answers the question “What’s the best way to get my money back?”

What is a credit profile? receeve explains

A receeve credit profile explained

When creditors use receeve’s new behavioural scoring tool to determine the credit profiles of their debtors, they will get two different scores that together provide the profile. These two scores are the debtor’s probability of recovery and their probability of self-service. To learn more about these scores, how they work together, and how they can help you correctly profile a debtor, why not take a look at this blog?

What is a credit profile? receeve explains

The role of receeve credit profiles in debt collections

The insights obtained from these two scores are crucial for creditors or collections agencies. By accurately profiling a debtor, they can effectively pinpoint the best collections strategies, methods, and tactics to encourage repayment. This is especially significant because once the debt reaches the collections stage, the focus shifts from whether lending to the individual was wise to retrieving the owed money. At this point, the money is already in the debtor's possession, and our primary objective is to recover it.

As a result of its capability to accurately analyse debtors and determine the collections strategies that will effectively engage them—achieving an accuracy rate of over 90% in pre-launch testing—receeve's behavioural scoring tool can significantly enhance your recovery rate and elevate your standing within the debt collections sector.