How the collection score can reduce credit costs

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If you work with credit, you must already be familiar with the concept of credit score to know what the customer's risk is at the time of purchase.

But did you know that it is also possible to analyze the risk at the time of collection?

While the credit score helps predict the chances of a customer becoming a defaulter, the collection score assesses the likelihood of the defaulter paying their debt.

Sounds interesting, doesn't it?

This new feature was incorporated into the Meu Crediário job seekers database system in February 2021, when we launched version 2.0 of our credit engine.

That's why I decided to write this article explaining how the second generation of our billing model works and how it can boost your business results.

It all comes down to bringing more efficiency and lower costs to your collection actions.

Want to know more?

Keep reading until the end or watch this video I recorded for our YouTube channel.

YouTube video
What was the billing like before the score?
When we talk about billing in retail , the model adopted by most stores can be summarized as follows:

Collection actions begin after 30 days of delay
With 60 days of delay the customer is blacklisted
To be more precise, collection actions take place within a period of approximately 30 days after the due date, starting with sending an SMS or WhatsApp message and then progressing to phone calls.

In the case of negative listing, some stores tend to postpone this period even further, waiting up to 180 days to blacklist a debtor .

That's a long time with an expired customer, don't you agree?

How our new collection score works
The new Meu Crediário collection score is very similar to the credit score that is already well known by our retail partners.

At the time of purchase, the customer is analyzed and classified by the system into one of five risk profiles: A, B, C, D or E.

Profile A represents a very low risk of default, while E represents a very high risk.

The credit score is used by the credit provider to decide whether or not to approve a sale on credit, in addition to being used to define the customer's credit limit.

The collection score uses the same rating scale from A to E.

The difference is that it takes into account the risk of not receiving payment from a late customer, even with collection actions.

By classifying this risk, you can take more appropriate measures to ensure that collections are less costly and more effective, according to the debtor's profile .

For example, imagine you have a customer whose installment is due on the 30th.

Depending on the risk profile of the sale and the risk profile of the collection, your store can initiate preventive actions to charge this customer even before the due date.

If the risk is high, seven days in advance you send an SMS reminding them that they need to come to the store the following week to make the payment.

For other customers, with a slightly lower risk, it would be best to start charging five days after the due date.

For customers with really low risk, it is possible to wait 25 to 45 days to start charging.

In the meantime, the customer who was charged in advance and has not yet paid is already in another phase of the collection process, probably receiving calls from the store.

Charge different customers differently
With the second generation of our score, your store will no longer treat all customers the same way when charging them.

The approach strategy for each customer will be based on the profile defined by the collection score.

This way, you can reduce the number of people working in the collections sector and still increase the efficiency of the process.

I'll give one more example.