People use a variety of reports to determine if their customers will be able to pay their bills. Unfortunately, much of the times, these checks are simplified to a single number and fail to provide accurate results. A credit score alone, for example, only tells the evaluator if the prospect will likely be able to pay credit card or bank debt. Yes, all debt is considered, but credit cards and bank loans account for most of consumer debt. If you are not a bank and don’t provide credit cards, that single number becomes a bit less focused and, therefore, less reliable.
The Holy Grail of eviction reports can also be misleading. First of all, the primary cause of an eviction is loss of income and the second most common cause is a serious illness. In both cases, the likelihood of a repeat eviction is extremely small once the root problem is resolved.
Filtered evictions are becoming very popular because they are very short lists. This is done by filtering the reports on the social security numbers of the people being evicted. The inherent flaw in this check is that eviction reports are not filed with social security numbers and the filtering will remove some actual evictions from the report.
Criminal checks are often run to remove potential problem customers. These can be helpful, but 90 percent of those arrested for Marijuana use are minorities while white males make up the vast majority of marijuana users. The results seem to be based more on racial bias than criminal activity. Add to this that every year more states pass legislation making marijuana use legal and you have a social quandary.
The bottom line is neither credit, criminal or eviction reports will give you the best answer to your quest to a customer capable of paying your bills. For that you need to turn to job verification.
I am not talking about looking at a check stub or W2 form. These documents can easily be altered or even created with modern computer software. I am talking about taking two minutes to actually contact the employer and ask them about the current salary per year and the duration of employment.
This takes just a small amount of work. You need, on occasion, to fax over the applicant’s signed disclosure agreement. This gives the employer permission to give you the answers you need.
Either you spend a few minutes on the phone or at your fax machine. Either way, you get invaluable information about the income and the stability of your prospective customer. The yearly salary figure may be quite different than the one the prospect reported and you may learn that the prospect has only been there a short time or was even fired in the recent past.
To make sure you are getting accurate results, you should go directly to Human Resources. The supervisor may have been told to expect your call and had already been asked to do the prospect a favor by exaggerating salary and start date information.
So what does this call do for you? Since about one in 20 applicants exaggerate their incomes and another 5 percent make them up, you will quickly find out who should not be trusted with your credit. You will also quickly know that a prospect has a good, stable job. Even if credit is somewhat questionable, a steady job trumps everything.
In my careful evaluation of all screening activity and the effect it has on bad debt I found that a careful check of Employment can double the amount of money your debt collection agency will be able to collect. Yes, I wrote DOUBLE and no other factor even comes close.
You might be interested to know that eviction reports are the least effective piece of information related to debt collection results. They do almost nothing.
Employment screening does a lot, however, and it not only shows up in dramatic increases in debt collection, it also dramatically reduces the number of problem customers. I could find no negative relationship for employment screening.
More money from your debt collection agency and fewer problem customers may be something you should want. Try calling employers for a few months and see the difference for yourself.
Understanding debt collection and background screening best practices can save your business big money. Building up front applicant screening into your business processes costs you very little, but saves you so much in the end. If you haven't already, partner with a full service debt collection and applicant screening company to guide your business to a place of security and prosperity. Contact us to sign up for a free account and get started protecting your business today.
ABOUT EXECUTIVE CREDIT MANAGEMENT, INC.
Executive Credit Management is a full-service Debt Collection and Applicant Screening agency with over 20 years experience located in Central New Jersey. We provide excellent service in the following areas: Employment Screening, Business Screening, and Tenant Screening. Executive Credit Management belongs to a number of Skip Tracing databases and offers services to help locate and confirm the current address of missing debtors. Other services provided are: litigation evaluation on all lawsuit decisions, improvement of the quality of the applicant data, Lawsuit Monitoring, Handling of Debtor Disputes. Executive Credit Management features the best Call Monitoring System in the Debt Collection industry.