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Must lenders get better at lending to borrowers with less-than-perfect credit?

Lisa Hochgraf at CUES Skybox is asking a question all lenders, bank or credit union, need to be asking. Or more appropriately, all lending managers.

Must we get better at lending to borrowers with less-than-perfect credit? I think so.

Here are two suggestions:

  • Increase the number of year’s you review…from two to three years…or three to four.
  • Consider including year-to-date information in your averages.
  • If you are using year-to-date information, consider requiring more reliable statements: CPA-prepared instead of borrower-prepared.
  • If you already require CPA-prepared, perhaps reviewed instead of compiled, or audited instead of reviewed.

What is your bank or credit union doing to adjust guidelines to the current realities?
If you are not, yet, do you think you will?

What sign are you waiting for to tell you that we are moving into recovery?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.
  1. Lisa Hochgraf

    Thanks, Linda!

    A while back I interviewed the loan officer from a community development credit union. She suggested that making loans to members with less-than-perfect credit requires a mindshift from “should I deny this loan?” to “how can I say yes to this loan?” As you point out, non-traditional documentation can be key.

  2. Linda Keith

    Lisa, I suggested to the lenders in my open-enrollment training on tax return analysis today that they may need to increase the number of years returns they are asking for. Several said they already have done so.

    One of the senior lenders and I are going to have a conversation as to just what guideline changes might need to be made, and how the regulators might need to look at things a bit differently, too.

    I invite any of my readers to get in on the conversation. This is one of the next BIG things to solve.