Upon checkout, customers in big-box retailers typically see several options for payment: cash, credit card or a consumer financing option. Guess which option has increased in popularity over the last several years? You guessed it. Consumer financing can often take the form of a retailer’s credit card, another type of financing account or a payment plan. This is where many larger, national companies have an advantage over smaller-to-medium sized businesses. Even if your customer service is impeccable, the ease of retailer or consumer financing is a game-changer for many of your customers. With Alabama Power’s Smart Financing, your business can finally tap into the potential that consumer financing affords.
Within that potential, however, there may be some concerns, especially around customers or potential customers who might have less-than-stellar credit or who are credit-challenged. In fact, Alabama is listed as one of the states with the Top 10 lowest VantageScores. A hesitancy to provide financing for credit-challenged customers is entirely understandable, but there are solutions available that are designed to eliminate your worries. One of those solutions is Smart Financing.
Here are three things that are important for you, as a service provider, to be aware of when it comes to offering financing options to consumers with credit challenges or poor credit.
Credit-challenged or bad credit? Know the difference
It is vital to know having a low credit score, or having no credit at all, can have many disadvantages and impact nearly every area of a consumer’s life. It’s essential, however, to understand what constitutes bad or poor credit, or what classifies consumers as merely being credit-challenged. There is a difference. Experian estimates that 30% of Americans have poor credit, which means that they have a credit score that is less than 620. If one-third of Americans experience low credit scores, you can understand how common it would be to interact with customers who potentially fall into this category. Furthermore, credit-challenged consumers (a credit score of 620-640) constitute an even higher number.
Offering to finance purchases for these customers can open up many new leads for your company and increase sales. In turn, customers may increase the dollar amount of their order or purchase a product or service they have been putting off due to affordability. Some reports indicate a consumer’s purchasing power increases by up to 15% when offered the option of installment or monthly payments.
Reasons why some consumers have poor credit and others don’t
It’s important to know why consumers end up with low credit scores. Common reasons can include: defaulting on payments or loans, a history of late payments, not having enough credit history, accounts in collections and more. People who have poor credit can often be looked down upon by traditional lenders because they are deemed too risky. From a traditional financial institution’s perspective, there is little-to-no way of ensuring that they will pay any new bills or debts on time or at all.
However, it’s essential to understand the circumstances that lead many people to have lower scores. While the above lists certain activities that can result in poor credit, there are other factors often at play. Not understanding what is on their credit report, under-or-over utilizing credit or prioritizing the wrong types of debt payments are common instances for poor credit that have nothing to do with whether a consumer can afford a product or service. Another culprit, errors on a credit report affect nearly 38% of consumers.
Proactive solutions for credit-challenged customers
No one wants to have poor credit. Most frustrating to people with poor credit, or who are credit-challenged, is how a credit score impacts nearly every area of their lives, even the ones that seemingly have little to do with credit or finance, such as home repairs and improvements.
Offering Smart Financing to your customers allows them many advantages. One of the primary benefits of the Smart Financing program is all payments are connected to their monthly Alabama Power bill. Smart Financing helps safeguard purchases and is a significant incentive that encourages consumers with poor credit to make payments on time. In turn, this can help consumers or customers with poor credit to rebuild eventually and, in many cases, improve their poor credit scores.
It also gives consumers flexibility. Making smaller payments on an expensive home repair can be appealing. Homeowners might begin to consider purchases that once seemed inaccessible. Gaining new customers is easier with Smart Financing, as people are more inclined to purchase your products or services if they come with flexible payment options.
If you think your customers would embrace Alabama Power Smart Financing, sign up today. We would love to talk you through any questions you may have about the app and how to become a Smart Financing service provider.