Nonprime - Beyond the Numbers

Given the disparity in lenders’ considerations, customers who fit the general nonprime category can’t be defined by a credit score alone.  A better way to identify a nonprime customer is to look at his or her credit report. Customers who have experienced one or more of the following events are often good candidates to refer to a secondary lender:

• History of slow payments
• Recent bankruptcy
• Foreclosure in history
• Repossession in history
• Tax liens and judgments
• Collections and charge-offs
• High debt-to-income ratio.

Keep in mind that nonprime lenders may be prepared to accept greater risk than other lending institutions, but there are still situations that are unacceptable, such as:

• Repossessions, foreclosures within last 12 months (unless included in a discharged bankruptcy)
• Open bankruptcy
• Dismissed bankruptcy within last 12 months or multiple dismissed bankruptcies
• Current auto/rent/mortgage delinquency (60+ days)
• Delinquent child support
• Consumer credit counseling
• Income less than required
• Debt-to-income ratio exceeding the maximum
• Payment-to-income ratio exceeding the maximum
• Residence and employment history less than required
• Fraud/Skip alerts.

At first glance, it may appear that serving the nonprime population is a highly complicated task, far more complicated than prime lending, and is, therefore, not worth the effort.  The reality is the nonprime demographic represents the most lucrative segment of the automotive market; it simply requires a different set of guidelines, and a working knowledge of how to satisfy those guidelines.   This knowledge offers the dealership more than just access to the largest segment of the automotive consumer population:  it plants the seeds for future profits through repeat and referral business.