If a customer won’t take the time to fill out a credit application, and you choose to extend credit to the customer anyway, you can protect yourself. Make sure you interview that customer to obtain the information you need to determine creditworthiness and to use as a resource if the customer’s paying habits deteriorate. If you interview the customer by phone, keep a recording of the call (but be sure you can legally record the call under the laws of your state), or write the answers down on your standard credit application and add the completed document to the client’s credit file.
The information your customer provides is valuable when making credit determinations, but that information can be one-sided, as your customer may choose not to share unflattering information about themselves. Perhaps they conveniently forgot to mention tax liens against their assets, or maybe they “don’t remember” that they previously filed for bankruptcy protection. To balance out the possibility that some information may be false or exaggerated, obtain documentation from other sources for the purpose of verification, such as a credit report.
Problems often arise when you act without enough information to accurately assess creditworthiness. If you enforce your credit policies and get the documents you need now, you avoid problems later.
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