How to Extend Credit to Customers

Step-by-Step Guide

1. 1

   Step 1: Create a uniform credit plan as well as a consistent method of qualifying customers to receive credit.

   Doing so means that all customers must meet the same basic requirements for receiving any type of credit.
   
   This helps to ensure there is no undue favoritism in how your company extends credit, effectively protecting both your reputation and allowing you to avoid legal action for discrimination.
2. 2

   Step 2: Prepare a credit application.

   Make sure that the application includes all relevant financial data that needs to be considered, such as duration of current employment, salary and wages, credit references and personal references.
   
   This will allow you to determine if an application merits further investigation or if the applicant obviously does not meet your minimum criteria. , Make use of all 3 major credit reporting bureaus, obtaining reports from each one.
   
   The reason is that issues may be reported to 1 bureau but not the other
   2.
   
   In order to get a complete idea of how the customer manages his or her debts, you need input from all 3 agencies. , This includes confirming current employment and also confirming salary and wages if the employer is free to divulge that information.
   
   Also verify the address listed as the applicant's permanent residence, as well as the residential telephone number provided. , Doing so will make it easier to confirm whether those references consider the applicant to be honest and diligent in managing his or her financial affairs.
   
   Ask specific questions regarding each contact's opinion of the ability of the applicant to manage the line of credit effectively. , Base this on the income level of the applicant, taking into consideration the current debt load carried and the prospects for continued employment.
   
   Once the credit limit and terms are established, notify the applicant that he or she has been approved for a credit line of a fixed amount, and provide the paperwork required to activate the account.
3. 3

   Step 3: Conduct a credit check.

4. 4

   Step 4: Verify other financial data found on the application.

5. 5

   Step 5: Follow up on personal and credit references.

6. 6

   Step 6: Determine the credit limit for the new account.

Detailed Guide

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