Credit review is the process through which a creditor or a financial institution will assess the credit profile of an individual that they have extended the credit. In credit extension, you will have a customer, have products on credit to pay at a later date. In credit extension a lot of things that need to be done by the creditors. This will be involved in credit review that will require you to consider a number of factors. In the section below, you will learn about all the necessary considerations that will be important in credit review and credit extension.
One thing that you need to consider when it comes to credit extension is the credit risk that will be involved. In this the creditor will require to determine the amount of risk that they are willing to incur from the situation. There is a possibility of getting to be paid by the debtor or even failing to get paid the amount either in full or some of it. The creditor will need to evaluate whether they are in a position to handle the bad debt or not, from the person they have offered the loan.
You will need to ensure that you consider the credit terms when you are doing credit review for credit extension. In this, the amount of cash that you get to add to the customer and the period need to be discussed or looked into. You can choose the period of time that will favor you or the person who you lend the money. It is good to think about the percentage to be added to the money paid back but this will tend to increase the level of the risk. If the rates are high, it will become difficult for the clients to pay.
It is important to ensure that you think about the credit qualification of the client when it comes to credit extension. It will be necessary to ensure that you review for the credit qualification and this may include the current credit score among many other factors. A person with a good credit score has been paying the loans and credits promptly. The creditor should hence have several forms that will need the financial details of the individual, their reports concerning the credits and the loans other loans that they owe other money lenders and other important info.