A credit application is a request for credit extension, often made to credit card companies or businesses. It can be made online, by phone, or on paper and includes financial information to determine creditworthiness. Credit laws regulate the process and information requested.
A credit application is a request made by a consumer or a business representative for an extension of credit. Typically, a credit application is made to a credit card company or business that extends credit directly to its customers and clients. A credit application can be made online, by phone, or on paper. A credit application often includes requests for various types of financial information that the credit issuer uses to determine whether it is in your best interest to honor the credit application. In some jurisdictions, the content of a credit application and the process by which credit decisions are made are strictly regulated.
Various types of businesses extend credit to others. Credit card companies, for example, offer consumers and businesses a line of credit that they can use at any business that accepts their credit cards as a method of payment. Other companies may offer credit terms to customers by providing goods and services without any up-front payment and then allowing the customer to pay weeks or months later or set up a payment plan. Issuing credit to someone can be a significant risk, so businesses often ask customers to complete a credit application before credit is extended.
The information requested in a credit application varies depending on the applicable law, as well as the preferences of the company issuing the application. In many cases, a person applying for credit will be asked for identifying information such as their name, date of birth, and address. Other information that may be requested includes a national or government identification number, the name of a person’s employer, as well as financial information. If a business applies for credit, similar information will be requested and, in many cases, the business will be asked to provide references from other companies with which it has a line of credit.
Once an application is complete, a credit issuer may review it to make decisions about whether to honor the credit application. The credit issuer may also use the information in the credit application to decide how much credit to extend to the applicant, as well as the terms under which the credit will be issued. For example, if a creditor notes that an individual’s application indicates that he has a very high salary and has been at his job for a long time, the creditor may extend a high credit limit along with a low interest rate.
Credit laws in some countries restrict the types of questions that can be included in a credit application. For example, in a country that prohibits racial discrimination in the issuance of credit, a creditor cannot ask a potential customer about her race. In addition, some laws require credit applications to disclose aspects of the credit granting process and may require applicants to consent to allow the creditor to contact credit bureaus or background check companies.
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