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Customer Credit Applications: What Your Really Need To Know

As a business owner or sales manager, you may intuitively know gross sales increase when a line of credit is offered for potential customers. A customer may want or need your products or services. However, he or she may only be able to afford your product in smaller payments.

If you’re considering offering financing through customer credit applications, this post gives you a quick guide on what you really need to know.

We must first start by saying it may be common sense that you are taking a risk by offering customer credit. It’s true that some customers will default. However, in most cases, the additional cash-flow and sales you’ll make by having customer credit often far outweigh the percentage of those that will fail to pay in full.

The customer credit application for an income and credit check helps mitigate that risk by having a profile and general picture of creditworthiness before extending the terms of your payment program.

What you really need to know, and the point of this article is: even consumers with excellent credit may not want to do business with you if your customer credit application process is too cumbersome or invasive.

Five Tips For Making Credit Applications Mitigate Credit Risk and Increase Sales

Keep it simple

Make only the most vital questions necessary on your customer credit applications. You may have bought or borrowed the application template from another company or resource. There is no reason you can’t simplify the application by removing unnecessary and overly-invasive questions.

Bring it Online

By asking customers to fill out a paper application, you’re doubling the work (you’ll need to type in the info), and increasing the likelihood of errors because of illegibility. Set up a simple computer or tablet terminal dedicated only to customer credit applications.

Avoid Hard Inquires

Learn the difference between a hard and soft inquiry on someone’s credit. If the potential customer has applied for several credit cards or loans within the last 14 days, his/her credit may be lower. Try not to add to the erosion with your inquiry. Make it a soft inquiry.

Educate your customer

If your potential customer is denied based on a FICO score, take the time to help them with resources to improve it. Your helpfulness could win you a sale in the future.

According to law, everyone is allowed one free credit report from each of the three credit reporting agencies (Equifax, Experian, and TransUnion) once every 12 months. Make your customer aware that he/she can request these three reports at www.AnnualCreditReport.com. Each of the credit bureaus can also be contacted individually by phone, website, or mail.

Credit Bureaus

  • Equifax – P.O. Box 740241. Atlanta, GA 30374-0241. 1-800-685-1111
  • Experian – P.O. Box 2104. Allen, TX 75013-0949. 1-888-397-3742
  • TransUnion – P.O. Box 1000. Chester, PA 19022. 1-800-916-8800

One key piece of information to note, by doing this they will not receive their FICO score, which is considered the culmination of several attributes of one’s profile. However, what’s listed on these reports feed into his/her FICO score. One can order one’s FICO score from: www.MyFICO.com for $29.95. He/she can get an approximation, or what’s called a FAKO score for free from two major smartphone apps: CreditKarma.com or CreditSesame.com.

These FAKO scores are pretty accurate, in our experience. These apps also give an analysis and give several suggestions on what that individual can do to increase his or her score specifically such as pay down certain balances, diversify, or pay collections.

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