Credit bureau reporting has been a tool of the debt collection industry for years. Delinquent debts are reported in the hopes that a delinquent customer will at some point need to pay off the debt in order to get a loan or improve his/her credit score. Most debts are reported by third party collection agencies but large companies like hospitals, banks etc may report directly.

I have contended in the past that small business owners overestimate the role of credit bureau reporting in getting paid. The best way to get paid is a consistent and persistent effort, of which credit bureau reporting is only a small part.

In fact, some recent changes in reporting laws may prohibit some debts from being reported at all unless the original creditor has full information on social security number and date of birth. I know from experience that many small business owners never collect such information.

And now we have the Equifax data breach, which impacted 143 million Americans. The breach put anyone – good credit or bad – at risk for identity theft. Many Americans are attempting to freeze their credit files, only to find that the call volume is so high that they cannot through to do it.    

While a small business owner likely cannot be held responsible for a breach that is clearly the fault of Equifax, the breach underscores once more that the risks of credit bureau reporting may not be worth the perceived benefit. Medical debt collection has certainly been impacted, since rating agencies have taken steps to lessen the “weight” of medical debts, since so many Americans are in default due to higher out of pocket medical expenses.

When I speak with small business owners, I have found that they often want the debt reported as a punitive measure. And while I get it, I still believe that the goal should be to put aside the anger at customers who don’t pay, and focusing on recovering as much as possible.

If you are looking to hire a collection agency and they mention credit bureau reporting as one of their primary tools, think again. Ask about the things that actually get a debt paid, like researching debtors and a persistent effort to contact them.

Remember the goal is to get paid. Ask your collection agency to focus on the activities that make it happen.