Retail credit
What is roll rate?
Roll rate is the percentage of balances or accounts in one delinquency bucket that move to the next, more severe bucket the following period.
Formula
Roll rate = Balances that moved into bucket N+1 this period / Balances in bucket N last period x 100
A roll rate, also called a flow rate, measures how delinquency progresses. For example, the 30 to 60 roll rate is the share of balances that were 30 to 59 days past due last month and are 60 to 89 days past due this month. Roll rates are calculated for each bucket, from current to 30, through to the final bucket before charge-off.
Multiplying roll rates across buckets gives an estimate of how much of today's current or early-delinquent balance will eventually charge off, which makes roll rates a practical short-term loss forecasting tool. Collections teams use them to measure the effectiveness of treatment strategies, and risk teams track them by segment to spot deterioration earlier than charge-off data can.
Roll rates can be volatile from month to month because of payment timing, holidays and the number of business days. Changes to collections practices, payment deferrals or charge-off policy alter roll rates without changing underlying risk. Calculating rates on balances versus accounts gives different results, and rates for small segments can be noisy.
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