A typical debtor owes several creditors at the end of the month. In order to improve our chances of being one of few debt buyers who will get paid each and every month ,we use the collection agency who actually pioneered the most successful collection philosophy to date, the applied psychology strategy. New data suggests we have just added another very powerful element to further improve our chances of success.
The latest quarterly reading of TransUnion’s Credit Risk Index, a proprietary indicator of creditworthiness, showed a 5% drop from the 4th quarter 2009 and a 1.6% drop from Q4 2010. According to TransUnion, the lower Credit Risk Index readings indicate that consumers are improving on their debt management skills and are more likely to repay their debt obligations. Moreover, consumers who defaulted on their mortgage obligations but continued to pay their credit card bills on time went up to 50% at year end 2010 from 37% before the recession.
Since the consequences of skipping a mortgage payment are not immediate due to foreclosure proceedings stretching on for many months, credit experts agree this is rational behavior under the new payment hierarchy. Credit cards are used for daily living expenses such as putting food on the table.
The higher priority placed 0n making credit card payments over mortgage payments is a welcome change in consumer behavior for fresh, charged-off credit card debt buyers like us!