Your prospect has requested an estimate for a new roof, windows, siding and a water treatment system. The house is big, there’s a new Mercedes in the driveway and the customer is a manager at a large company. Score! But the customer’s home improvement financing request is denied by the finance company. What’s going on, you wonder?
What you see in the customer’s home is only part of the picture. Most finance companies will use a consumer credit report and the information submitted on the credit application to determine whether or not a home improvement loan can be approved. Each lender has its own criteria for evaluating whether the customer has good credit, bad credit or something in-between.
Customer Credit Application
Some home improvement lenders are strictly FICO score driven. The customer’s credit score alone will determine whether or not the customer will qualify for financing. Other lenders focus more on the actual credit history as the score can sometimes not be an accurate reflection of the customer’s credit-worthiness. These lenders are looking at the types of accounts open/closed, the customer’s payment history and whether or not the customer is opening a lot of new credit. Another key factor can be the customer’s overall credit card debt load and the customer’s debt-to-income ratio. The finance company wants to see if the customer can afford another payment.
In our example above, while your prospect looked promising from the outside, the application and credit report told a tale of a borrower who had opened and maxed out six new credit cards this year, and the new Mercedes payment pushed their debt ratio over the edge. That’s something that home improvement contractors may not see in the home, but the finance company sees an overextended borrower.
At Foundation Finance Company, we have experienced credit analysts who review each application for credit and can find ways to approve more customers than many other lenders. Our three-tier approval system helps you close more sales … even for buyers with some credit challenges. Learn more here or give us a call at 1-855-241-0024 x5012 or email [email protected] for more information on our financing programs.