Poor Approval Rates or Poor Procedures? Part 1

As discussed in Part 1 last issue, over 25% and fast approaching 30% of retail consumers in Canada are unable to secure an approval at a prime lending institution today, most dealerships are now accessing credit bureau reports on their customers via their Dealer Track portals and at minimal cost (approximately $5.00).
The following benefits are achieved by pulling a credit bureau report:

It positions a Business Manager as an expert: Offering to pull a customer’s credit bureau report will provide a customer with a unique reason to visit the dealership and creates more customer trust that they are dealing with a credible and knowledgeable professional. This procedure dramatically increases the percentage of appointments kept when fielding a sales call or responding to an e-mail inquiry. This serves to differentiate the dealership from other dealerships who are merely trying to push products and positions themselves as solution providers. Many Business Managers will offer a customer who contacts a dealership to pull their credit report as a complimentary service. This strategy drives more customers to visit their dealership as most other dealerships do not offer this service.
It further obligates the customer and increases appointments kept: They inform the customer that there are two credit bureaus and that not all lending institutions rely on the same credit bureau for adjudication. They further inform the customer that creditors do not necessarily report to both bureaus and thus by accessing and reviewing the two reports will direct them to send an application based on the bureau that looks better. Customers may also have the perception that there is a cost for pulling a credit report and if the dealership is willing to pay for it, a sense of obligation can be generated.
It creates curiosity: A Business Manager can further indicate to a customer that 20% of credit reports contain errors or omissions that they will be happy to assist in having corrected. This quite often is the reason for a declined or conditioned application. Customers are generally unaware of this fact and are appreciative of the Business Manager’s helpfulness. For example, there may be unpaid collections showing on a report that have been satisfied or information that is incorrectly reported. A Business Manager can help a customer or direct a customer how to obtain documentation that will rectify the errors or omissions and where to send them. For example, Equifax must have a report corrected within 30 days of written notification. Most other Business Managers will not provide this information which will once again create curiosity to visit the dealership.
It manages a customer’s expectations: By reviewing the credit report with the customer, a customer is not told why they may not qualify for a sub-vented rate from a manufacturer or qualify for a loan at a chartered bank—THEY ARE SHOWN! This procedure will usually place an offensive-minded customer into a defensive or submissive customer who is more manageable. By allowing the customer to see their credit accidents will convince them why they must accept a higher rate of interest and perhaps not be able to get the vehicle that they originally wanted.
It keeps the customer from shopping: If the customer has made several applications at other dealerships or through other financial institutions, multiple inquiries will show on their report. With this evidence in hand, a Business Manager will have more success in keeping the customer from shopping.
It builds more rapport and trust: By reviewing a credit report with a customer, a Business Manager will have an opportunity to discuss personal matters based on residence and job history which may also lead to having something in common with them. By showing a genuine interest in the customer’s history will earn trust and allow the customer to more openly discuss their credit history. Business Managers need to sometimes act as a sounding board for customers.
It increases approval rates: Lenders need to have solid reasons why to approve an applicant. Lenders will approve customers who have had a tainted past as long as the conditions that created the credit problems have been resolved. Reviewing a credit report with a customer will allow a Business Manager to look for resolve. Presenting a customer’s strengths and resolutions to their lenders is precisely how top Business Managers get more deals approved. If a report is not thoroughly reviewed, an opportunity for approval may have been missed.
It allows the Business Manager to paint a vision of a better future: Many customers are only concerned with the present—getting a newer vehicle. By reviewing a credit report with a customer, a Business Manager can ask questions regarding children’s education, purchasing a home some day in the future, planning for retirement or just what dreams a customer may have. These issues may be the furthest from a customer’s mind but by initiating such conversations allows a Business Manager to stimulate a customer’s thinking. Customers do not think of the future but the credit report allows the Business manager to paint a vision of a better future.
Prepares for other product sales: Quite often, the reason for a customer’s credit problems could have been as a result of a vehicle requiring extensive repairs, a disability or a loss of employment. With this information in hand, a Business Manager will be better able to present and secure after-market products that may have been related to the reasons for poor credit showing on their credit report.
It does not fuel false expectations: Too many sales consultants will sell a customer what they want instead of what they need. This procedure is sometimes fostered by sales managers telling their sales consultants to sell the vehicle first and get the deal approved afterwards. Unfortunately, many customers will be needlessly led to believe that they can buy the vehicle they want but only suffer the ‘let-down’ effect after a declined or conditioned application. It becomes very difficult to ‘switch’ a customer to a different vehicle should the Business Manager be unable to get the original request approved. If a secondary approval is obtained on a different vehicle, many customers will abandon the dealership and start the entire process again but at another dealership. If the customer sees their credit report, it becomes an easier task to switch vehicles as they understand why they cannot drive the vehicle they want.

Many dealerships offer a pre-approval service for precisely the aforementioned reasons. A pre-approval service does not fuel false expectations for a customer and allows a dealership to employ a more productive and effective strategy.
Reading a Credit Bureau Report:
As we have alluded to earlier, many Business Managers will be intimidated with Credit Bureaus because they do not know how to read them or where to access them. Today DealerTrack not only provides a dealer access to the credit bureaus on their portals but their representatives are knowledgeable and will respectfully train and coach a Business Manager how to read a report. As well, most lender representatives will be able to coach a Business Manager on this subject. Why not ask both to share their knowledge?
Credit Counseling:
Many Business Managers have now become experts at credit counseling. They know how to get items corrected on credit bureaus and know how to improve a customer’s credit score. They use information from training workshops that they attend that allows them to create credit recovery manuals that they use to coach their customers how to get back into favour with prime lending institutions. It allows them to offer unique services differentiating themselves from other dealerships and Business Managers. It is proof of their professionalism and that they are truly experts in Financial Services providing solutions.
Getting More Deals Approved:
There are two legitimate ways in which a lender may approve a deal for a customer that has a poor credit history: justification and extenuating circumstances on the part of the customer, supported by proof. Make sure that you send all appropriate documentation of your customer’s extenuating circumstances along with the credit application to support an approval. If you have not seen the credit report, how can you sell the application?
Be proactive. During the “turnover,” if a customer admits to having “slow” credit (and this information will turn up on the Credit Bureau), call or send a note attached to the lender and disclose it so it will not come as a surprise to the lender. You need to sell the lender how the situation has been resolved or what caused the difficulty in the first place. Always formulate a “game plan” before calling your lender back to negotiate an approval with fewer or less restrictive conditions. Carefully review your customer’s credit application and prepare “strengths” of the application to communicate to the lender.

You will find many applications that have conditional approvals based on higher down payment requirements or lower advance limits. You will many times need to work with the customer to secure a higher down payment. If they have additional funds to put down, it’s likely that you will only need to explain the lender’s position and how they want to back up the approval with a stronger equity position. In most other scenarios, the customer does not have the additional funds or does not know where to get them. Here is a check list that Business Managers use to assist their customers in finding some more money.

Successful Business Managers know how to dig in the corners and find ways to get deals approved. Their experience and knowledge allows them to roll more vehicles over the curb for their dealers. They follow procedures regardless of the applicant and let the process and tools work for them. They attend workshops to update themselves on new strategies and tools that will improve their efficiencies and productivity. If you want to increase your approval rate immediately, start implementing some solid procedures this year. Start pulling credit reports, review them with your customers and work smarter with your lenders. The results will be amazing and then you can start tackling all of the other factors that are within your control to increase your approval rate.