My Customer Wasn’t Approved for Home Improvement Financing — Now What?

Home improvement projects are stressful undertakings for homeowners to manage — and the high cost of contractor services seems to be the number one source of that stress, according to a recent survey from Modernize. While home improvement financing makes it easier for homeowners to pay for these services, there will inevitably be a time when a homeowner gets denied credit.

For contractors, this can be an awkward and uncomfortable conversation to manage. Your already sticker-shocked customer now has to deal with the sting of rejection, and it’s not unlikely they’ll direct their frustration at you. While a rejected application is never ideal, you still have options to turn the customer experience around, keep the sale, and help your customer save face.

Manage Homeowner Stress, Recover the Interaction

No one likes hearing the word “no,” and your homeowner could react emotionally to a rejected application. Some homeowners may be angry and confused, while others feel embarrassed. In some cases, customers may feel defensive and attempt to argue the decision, especially if they’ve previously been approved for other types of credit.

Customers don’t always realize that credit denial can happen for many reasons and doesn’t always reflect bad payment history. A credit check may show a high ratio of debt to income or a large number of recent credit applications. Sometimes credit denials occur because of incorrect or missing information on the application. One common reason for denial is simply a lack of credit history, especially among younger homeowners just starting out and newcomers to the U.S.

While your financing partner will handle contacting your homeowner about their denial and explaining the reasons behind it, how you follow up with negative customer experiences can help recover the interaction and the sale.

Let’s explore how contractors can salvage the customer experience after a denied credit application.

1. Remain Calm, and Avoid Unproductive Back-And-Forths

If your customer responds angrily or emotionally, your job is to remain calm and empathize with them. By showing your homeowner that you are actively listening, you can begin to positively redirect the customer interaction.

Rejections can also feel very personal, so try to avoid statements that start with “you” in your responses. Instead of leading with, “You weren’t approved for financing,” try something like, “I’m sorry our financing partner couldn’t approve your application.” The language in the second sentence depersonalizes the rejection, shifting the blame from the customer (and their credit profile) to the lender.

Even if you partner with a third-party lender, homeowners might try to plead their case with you. Avoid going back and forth with them, speculating possible reasons for their denial. It’s not only unproductive, but it also compromises your professional integrity. Instead, direct them back to their lender with any questions about why they were rejected.

2. Adjust the Scope of the Project

Another strategy is to scale back the project scope to lower the total cost, if possible. It’s key to go over the difference between the “must-haves” and “nice-to-haves” early in the sales conversation to give the homeowner an idea of a baseline budget. Slimming down the project to “must-haves” only could be a solution.

You can also ask the homeowner to come up with a realistic budget that matches their finances while completing necessary work. People like to have a sense of control, and offering this option empowers the customer after a loss. If you can’t rework the proposal without compromising your rates, you may need to politely let them know your services don’t fit their needs. And that’s okay! Thank them for their time, offer them a business card, and invite them to keep you in mind for future projects.

3. Have Second-Source Financing Available

Finally, you may want to have some backup financing as an option. Some lending companies only approve credit applications for homeowners with prime or super prime credit scores (usually 660 or above). While this allows them to offer borrowers lower interest rates, it shrinks the borrower pool. This means you may have to handle more customer rejections.

One option is to offer customers financing through a second company. The downside is that they will need to fill out another application and take another pull on their credit. However, some financing companies like FTL Finance are part of a lending waterfall (meaning if we can’t approve a credit application, we pass it along to another lender that may). In this scenario, the customer has less paperwork to fill out and avoids another credit pull.

Backup or other alternative customer financing options can help save a lost sale. It also shows that you care about your homeowners enough to consider their needs and potential problems along the way.