The second part of our two-part series on how to report consumer credit is humorously called the “stick approach” because it is symbolic of the sticks that farmers used to use on donkeys who were being stubborn. Whenever a carrot didn’t get the animals moving out in the field, a stick surely did. This does not mean that it is necessary to whack customers to get them to pay their bills though. Instead, all you have to do is gently remind them of the following ugly consequences that can happen when they avert their responsibilities:
Bad Credit Makes You Look Bad
Having bad credit is just plain embarrassing, especially when someone gets turned down because of it when they apply for a loan. The car sales rep, bank representative, and everyone else involved in the loan process all find out about it. And although they are not supposed to discuss the personal information about their clients that they see, it is just human nature to want to talk about things. This is problematic because the gossip could end up harming someone’s personal reputation when the word gets out that they don’t pay their bills.
Unpaid Collections Stay on File for Years
According to the three major credit bureaus, Experian, TransUnion, and Equifax, the average unpaid debt will stay on a person’s credit report for about seven years. And if the debt is accurate, there is no way to remove it before that time is up. In order to get a visualization of how long that much time is, it helps to think of it in terms of education. For example, in seven years, a person could get both a bachelor’s degree and a master’s degree. Or they could just go through high school about two times in a row.
Terrible Interest Rates and Scams to Deal With
The FBI says that sub-prime loan companies and credit card companies with bad intentions regarding consumer credit reporting can easily find people with bad credit to use as targets to make a tidy profit. All they have to do is search the credit bureau sites for people who are struggling financially. Then, they send them all kinds of offers in the mail that seem too good to be true.
And what do you find in the tiny, barely legible script of the fine print? Outrageous fees, high interest rates, and contract details that make it next to impossible to ever get out of debt with them. Since all the information is technical, legal jargon, most consumers have no idea what they are getting themselves into though before it is too late.
So, If I Report Consumer Credit, Do I Need a Carrot or a Stick?
With Datalinx, in almost all cases we report both positive and negative payment history information. So you don’t have to choose between a carrot as incentive or a stick as negative reinforcement. You get to leverage both. And because you’re reporting positive information, you can frame your role up as the hero of the story because you are offering your customers positive effects on their credit, like:
- Better interest rates on credit cards, auto loans and home financing
- Higher approval odds
- Better employment options
- Reduced insurance prices
At the same time, you’re being transparent about possible consequences of habitual late payments, like:
- High interest rates on credit cards and other loans
- Bad approval odds on credit offers and home financing
- Negative information following them around for years
Partnering with a credit reporting software service company like Datalinx simplifies the process of reporting consumer credit. We’ll help you through every step so your organization can become a data furnisher and start reporting consumer credit. Give us a call today for more information.
Speak Your Mind