Understanding Loan Delinquency Models

It’s important for a lender to know which loans are performing (making payments) and which accounts are non-performing (or stale) so receivables remain accurate and reflect the true health of a portfolio.
At its core, it comes down to whether a borrower is paying or not paying — and how the lender chooses to define and manage that delinquency.

There are two primary delinquency measurement methods:

1. Recency Delinquency

Recency delinquency is measured by the time since the borrower’s last (minimum) payment.
It is a more forgiving approach, focusing on whether the borrower is making payments now — even if they missed some in the past.

• If a borrower is past due but makes a payment, the delinquency “clock” resets.
• Customers remain delinquent until they make a payment, at which point they are considered current — until the next missed payment.
• Often used for short-term loans or customer bases where missed or skipped payments are common.

2. Contractual Delinquency

Contractual delinquency is measured by how many payments have been missed according to the loan’s payment schedule.
Unlike recency, making a payment only reduces the number of missed payments — it does not automatically make the account current.

• Often used for legal and compliance purposes.
• In Intro XL, this is measured using the payment status field.
• Payment status can change over time, so historical reports may show different results if run later.

Which Model Should You Use?

Your choice depends on your portfolio type and customer behavior:

• Recency – Practical for short-term loans or when occasional missed payments are common, and the priority is keeping customers making payments.
• Contractual – Preferred for compliance, legal, and long-term loan management where exact missed payment counts matter.