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Happy New Year!  As we begin the New Year we believe it will be helpful to reprint an article we wrote at the beginning of last year on tips to increase the percentage of credit applications that are approved.

What would it mean to your bottom line if you could get an additional 5%-10% of your credit applicants approved compared to last year?  More approved applications leads to higher sales volumes and greater profitability. You can be sure to maximize the percentage of approved credit applications by following some of these tips below.

  1. Make sure the customers’ income on the credit application is accurate – One of the key credit worthiness metrics that most lenders review are debt to income ratios. The higher this ratio the greater the risk to the lender.  Pinnacle bases the debt ratio off of the customers’ gross income (before taxes and other payroll deductions), not net income (after taxes and payroll deductions).  This is an important distinction because when asking customers for their monthly or annual income they may think of it in terms of their “take-home” pay, or net income.  So be sure to spend the time to make sure the customers’ gross income is listed accurately.  Better yet, ask customers if they have a recent paystub you can copy or take a picture of with a smartphone.  That way you can calculate the gross income yourself and even provide the copy to Pinnacle if necessary.  If you have any questions about calculating the gross income based off of the paystub please let us know we are happy to help!
  1. Be sure all sources of income are listed on the application – In addition to a primary job many customers will have other sources of income such as Social Security income, income from a 2nd job, investment/dividend income, annuities, etc. Please be aware that rent, alimony, and child support are ineligible sources of customer income.  So be sure to ask customers if they have income from other sources that can be listed on the application as well.
  1. Add a co-applicant or Spouse to the Credit Application – Pinnacle will always look more favorably upon a credit application with a co-applicant or spouse listed. This is especially true if the co-applicant has income as well!  Don’t worry if a co-applicant has worse credit than the main applicant.   Pinnacle will in most instances base the credit decision off of the customer with the better credit.
  1. Be sure the homeowner is on the application – One of Pinnacle’s requirements is that the homeowner is listed on the application. We will make exceptions to this if the applicants’ credit is good however we strongly urge you to be sure that the applicant(s) own the home.
  1. Get a down payment – Asking for, and receiving from the customer, a down payment of at least 10% of the payment price, shows a level of commitment to purchase your product or service. The more committed the customer is, the more favorably we will look upon the application.  This is particularly true for customers that may be marginal from a credit perspective.  If a down payment is obtained, please be sure it is clearly indicated on the credit application.

We encourage you to provide these tips to your employees who complete the credit applications with your customers.  By following these tips and spending a little extra time completing an accurate credit application can lead to higher approval rates for you and your customers!