What is cure rate?

A cure rate measures how often delinquent accounts are brought fully current. It is usually calculated for a specific delinquency bucket and time frame, such as the share of accounts 30 to 59 days past due that are current one month later. Cure rates are the counterpart of roll rates, since accounts in a bucket either cure, stay in the bucket, partially pay or roll forward to a later one.

Collections teams track cure rates to evaluate strategies, staffing and contact channels, and to prioritize accounts. Accounts with high predicted cure rates may receive lighter treatment, while those unlikely to cure receive earlier and more intensive efforts. Risk teams also use cure rates in loss forecasting, roll rate models and CECL estimates.

Cure rates can be overstated by temporary cures, where accounts become current and then go delinquent again within a few months. Re-aging, payment deferrals and modifications that bring accounts current without real payment can inflate results. Tracking redefault rates and requiring sustained performance before counting an account as cured gives a more accurate picture.