Anyone who has ever had the opportunity to apply for credit has probably already asked themselves the question: will the funding be granted? What are the credit acceptance criteria? Why am I facing a declined credit? If the opinion is unfavorable, what is the reason for the refusal?
Why are there acceptance criteria for a loan
The reason is simple, a credit commits the borrower who must pay the agreed repayment but also commits the lender who takes a potential risk if the borrower is unable to repay the loan. This is why the latter will only want to lend money to customers who are likely to be able to repay their debts.
It then sets up credit acceptance criteria, also called credit acceptance conditions . Note that the implementation of these credit acceptance criteria is also to the advantage of the borrower, because they aim to protect consumers who could put themselves at risk of going into too much debt.
Taking out a loan is indeed not to be taken lightly. The loan will certainly have to be repaid, but above all not to harm the end of the month, nor to lead to over-indebtedness. Besides, for any communication on credit, the following preventive sentence must appear: ” A credit commits you and must be repaid. Check your repayment capacity before you commit “.
Credit acceptance criteria: disparate rules
As we will see below, the criteria for accepting a loan are specific to each lender, to each product and are also subject to change over time.
Different credit acceptance criteria depending on the lender
Each lender, be it a bank, an insurer or a credit specialist has its own credit acceptance criteria. They are based on their own experience in terms of risk from each client profile. They also depend on the level of risk and therefore the level of profitability desired for each company.
Some credit organizations are likely to accept more customers because they offer higher rates in return. This is what allows them to maintain their profitability. Indeed, the risk of not recovering part of the loaned money is the main component of the profitability of the sale. A customer who does not repay his credit and on whom the lender has failed to recover his debts is a dead loss. It is therefore a crucial question for the credit organization. In addition, certain offers specialize on specific clienteles such as Société Générale, which distributes a loan intended for young workers.
How does our credit questionnaire work?
On the strength of this observation, our comparison provides the credit applicant with a degree of acceptability with each credit organization. In order to obtain this help, it is necessary for the Internet user to enter a form on our credit comparator.
This step is essential because the concept of acceptability to be depends exclusively on the profile of the borrower. Capitaine Crédit does not forget its primary vocation to support the customer in the search for the best credit. We also take care to avoid any credit situation accepted then refused to the final study of the file.
This is why at the end of the form, we classify the credit offers from the lowest to the highest rate. We only add this concept of acceptability to the right of the rates, because good credit is above all accepted credit. An acceptability rate greater than 50% indicates that the credit is accepted. Note that we do not know the credit acceptance criteria of each organization exactly because they remain confidential and strategic.
Different credit acceptance criteria depending on the product requested
Even if the main rules are common to all the products, they can however differ according to the type of credit. In general, three categories of loans are to be distinguished:
- consumer credit
- credit groupings
- home loan
For example, a grouping of credits will accept customers who have a high debt ratio because precisely one of the objectives of the product is to lower the monthly payments in order to reduce the debt ratio. On the contrary, a high debt ratio will be almost prohibitive for other types of loans.
Credit acceptance criteria: the main principles
The criteria for accepting a loan can be broken down into three stages. These must be crossed successively in order to have credit granted:
- step 1 : the refusal rules
- step 2 : application of the risk score
- Step 3 : Human intervention for the finalization of the file (verification of credit documents)
Before talking about criteria for accepting credit, it is rather necessary to understand the rules of refused credit . It is rare to end up with a loan refused without logical reason. The rules set out below are not intended to be exhaustive because, as we have seen, they are specific to each lender. However, those described below are part of a common core of reason for refusal.
- filing of the borrower or co-borrower with the Banque de France
- no stable job: unemployment, inactive, temporary or short-term fixed-term contract, etc.
- income too low (generally lower than the minimum wage)
- debt ratio too high (excluding grouping of loans)
If the customer meets one of the criteria, it is likely that the credit will be refused. However, this is not unacceptable, except for the first two items.
Advice: in the case of a credit refused on a permanent contract by all organizations, increasing the duration of the loan can tip the balance on the right side.
Risk score intervention
The risk score is the most complex step in the credit acceptance criteria . Indeed, as much as the refusal rules seen above are generally simple and easily understandable, the risk score is completely opposite. The score corresponds to a score given to each credit request. This rating is based on the customer profile and follows from the probability that this customer profile will repay the loan correctly.
This probability is based on the share of reimbursements correctly made by similar profiles in the past. Each score is unique and it is frequently updated by credit specialists to be as close as possible to reality and thus minimize the risks of the lender.
These first two steps are carried out automatically and directly at the end of the form entered. This is why an agreement in principle can be given to the applicant directly by email or by telephone. However, there is one last step to take.
The final credit acceptance criterion requires the intervention of a specialized advisor. The latter will verify the veracity of the information entered in the form, including the study of the supporting documents requested following the agreement in principle. He also studies whether the file seems acceptable to him in relation to the risk. If everything is consistent, a final financing agreement will be given to the client. He will receive the funds in his account after the legal withdrawal period.