According to the Federal Deposit Insurance Corporation (FDIC), the pandemic may have a harsher financial impact on families with insufficient savings or without access to credit. Their 2019 survey revealed that “35.8 percent of U.S. households may need credit to handle unexpected changes in income and expenses. In 2017, however, one in five households (19.7 percent) did not have a credit score, making it harder for them to obtain credit.”[i]
The percentage of credit-challenged individuals was high before the pandemic. So, it’s likely that the percentage of people facing credit issues will increase in 2021. Learning about them will help you better serve these underserved customers.
Understanding Who They Are
Credit-challenged customers are those individuals with poor credit, no credit history, or those with bankruptcy in their past. According to Experian, one out of every three Americans have less than perfect credit.[ii] People transitioning jobs, recently divorced, and even college graduates are great examples of a segment of people looking for affordable ways to get what they need.
Make Them Feel Welcome
Most of these customers are aware of their credit circumstances and purposely avoid “embarrassing” situations when visiting a store. Some will browse your store and leave empty-handed if they don’t see any financing options suited for them. Displaying posters throughout your store and windows for non-traditional financing options will help them feel welcome and comfortable to ask questions. You can also include financing information in your webstore for online shoppers.
Present an Alternative
When people don’t have access to traditional financing to cover small expenses, they turn to relatives or friends. But what happens when friends and family members are also under financial distress? And more importantly, who helps them when they need a new appliance, piece of furniture, or a new mattress? Lease-to-own financing offers credit-challenged customers a flexible option to pay over time for what they need, regardless of their credit.
Build Their Trust
Fully understanding how lease-to-own works will help correct any misconceptions while boosting customers’ trust and satisfaction. Our article Everything You Need to Know About Secondary Financing will help you explain its’ benefits, requirements, and how it helps customers with credit issues get what they need, without posing a risk to your bottom line.
Focus on Their Needs
When customers have little buying power, they’ll settle for the least expensive product, even if it doesn’t meet their requirements. By giving credit-challenged customers access to a financing alternative, you’ll be able to switch their attention and help them find the most suited product. Satisfied customers will share their experience with friends and relatives, generating positive word-of-mouth advertising for you.
Invite Them Back
People with credit constraints will appreciate any extra support you can offer them. From a small discount to a complimentary service, going the extra mile will go further in winning their loyalty. In this white paper, 5 Proven Ways to Grow Your Furniture Business, you’ll find practical advice on how to increase your marketing efforts and capture more selling opportunities without adding to your workload.
Alternative financing solutions are an accessible and safe option for credit-challenged customers to get what they need and for you to increase sales with minimum risk for you.
[i] 2019 FDIC Survey of Household Use of Banking and Financial Services, p.55
[ii] What Is a Good Credit Score?
About Monica Tucker: Monica Tucker is a senior marketing content writer for Snap Finance and a regular contributor at Furniture World Magazine. Visit www.linkedin.com/in/mtuckercopy to learn more about her and read other articles.
About Snap Finance: Innovating the fintech industry, Snap Finance helps furniture merchants reach their full sales potential by offering credit-challenged customers flexible financing solutions. Are you interested in learning how Snap can help you boost your online and in-store transactions? Contact Snap at 866-871-0311 or visit snapfinance.com.