Surprisingly, 20% of loan applicants are denied due to poor credit. Whether you are selling a car, a house, or any item that requires a credit check, this statistic likely impacts your close rates. To demonstrate, we examine how consumer credit impacts American businesses – along with solutions to revive the deal.
Consumer Credit
According to Experian, 66% of consumers have a credit score within the ‘good’ to ‘exceptional’ range under the FICO scoring model. Pending other unique financial factors, buyers at or above this score threshold tend to qualify for more purchases versus a consumer whose scores are not as high.
Comparatively, this leaves 34% of consumers with a credit score in either the ‘fair’ to ‘very poor’ brackets. To explain, here is what those numbers look like at a glance.
| Category | FICO Score Rage | Percent within range |
| Exceptional | 800–850 | 20% |
| Very good | 740-799 | 25% |
| Good | 670-739 | 21% |
| Fair | 580-669 | 18% |
| Very poor | 300-579 | 16% |
It’s important to realize that low credit scores can drastically impact whether or not a prospective buyer is approved for a new line of credit. In fact, here are three ways poor credit can affect sales.
1.) Deal denials
Usually, the worst scenario with any credit-challenged application is a flat out denial. As shown above, denials based on credit account for roughly 20% of lost deals.
2.) Subprime terms
Generally speaking, even when a customer qualifies for a purchase, low credit scores can still impact whether or not they actually move forward with the offer. With this in mind, 30% of loans are subprime. Subprime borrowers typically get stuck with higher interest rates and additional security deposits. Consequently, this causes some eager applicants to walk during negotiations.
3.) Risky payment activity
Furthermore, poor credit is sometimes due to a simple lack of awareness on how to use credit responsibly. As a result, this can lead to late payments or defaults, which could also influence annual sales targets.
Business Solutions
If your business model requires a credit check to close a deal, you’ve likely experienced lost or damaged sales over bad credit. When this is the case, what do you do with your turn-downs? Let them walk away? Refer them to a 3rd party credit service? In essence, ScoreShuttle offers businesses a better solution.
ScoreShuttle partners are able to minimize credit-based rejections by offering their declines the tools to improve their creditworthiness. The software’s lead management system keeps turn-downs in their sales funnel and sends an alert the minute hot leads reach their goal score. The result? Higher scores for their customers, and more sales for them.
To learn how you can use ScoreShuttle to help you increase your sales, click below to schedule a software demo.
Resources: https://www.forbes.com/sites/niallmccarthy/2019/01/03/the-number-of-americans-holding-auto-loan-debt-shows-no-signs-of-slowing-down-infographic/#211889157ffe [https://www.newyorkfed.org/newsevents/news/research/2018/an181203][https://www.credit.com/blog/2016/02/how-many-americans-have-bad-credit-136868/] [https://www.experian.com/blogs/ask-experian/consum]
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