Now Leslie has gone into collections because she just isn't paying her bill, and we've sent it off to a collection agency because we're tired of sending her notices in the mail. She's ignoring them. Now the collection agency is using a collection score to determine the likelihood of Leslie paying any of that money back. If her collection score is very, very bad, then they may not spend the money and time and resources to try and collect it. They may just send collection letters to you and just put it on your credit report and then eventually sue you. Or if your collection score is very, very good, they know that they have a good shot at recovering something, so they may put one of their junior collectors on it or call you instead of just sending you letters, so they're going to vary their actions to collect based on what their collection score is.
What information are they using to come up with a collection score?
Credit data. Let me give you an example. Let's say that Leslie has a $5,000 collection. One of the legal reasons or the legal permissible purposes to pull someone's credit report is the act of collecting a debt. The collection agency can pull your credit report. That's completely legal. If they notice that Leslie has a credit card with a $20,000 limit and a zero balance, she has the ability to pay that $5,000 collection because she can just charge it on the other credit card. The collector doesn't care that that's a bad financial move, and it's foolish for you to do that because you're really just robbing Peter to pay Paul. That will be counted in your collection score. You have the ability or capacity to pay the collection, so they'll know this and they'll use it in their strategy when they're trying to entice you to pay. "Hey, why don't you just charge it?" or "Why don't you just give us the card number and we'll charge a thousand dollars a month for the next five months?" Those are the types of deals they'll try to offer you. That'd give you a good collection score.
Customized scoring models
And to all that, add the custom model. It's basically an analytic contract given to either someone like Fair Isaac, or one of the bureaus, or one of the other boutique modeling companies out there. You'll have a big lender -- say, AmEx, for example -- who will say, "Hey, look, we want to build a custom credit risk score for applications or for account management. We like FICO, but we want something specifically built for American Express." They'll contract with one of these companies to come in and actually develop a credit scoring model just for them. It's very, very expensive to do that, but the performance of the model, we're talking about Ferrari versus Buick. It's significantly more powerful because it is in fact a model built on American Express data for use only by American Express.