How many times have you bent over backwards to put a special finance deal together? How many times have you been able to get the same deal done when those customers come back ready to trade in their vehicle? I think you will find the answers to those questions to be at completely different ends of the spectrum.

More people than ever have fallen into the category of special finance due to the unreliable economy and decline of the housing market. With banks tightening up, the original special finance candidates have slipped further and further down the scale. They have gone to what I would now call “no-more-chance” finance. So how do we turn it around?

Special finance is more than just knowing how to structure a deal. It’s more than being able to come up with the stips required by the bank. It is even more than getting a co-signer or money down. It’s about educating your prospective clients. Knowledge is power and you may be missing the boat when it comes to really knowing and understanding special finance.

Every situation is different; some people don’t want to help themselves. It is our job to help these people better their situations, which in turn will better their lives. This goes back to educating your customers. If you have the knowledge, use it to help people. In turn, you’ll gain future business. It starts with counseling people how to improve their credit situation. If you are looking at the credit reports, you know what the issues are and what the customers need to do to improve their situation. A manager, not the salesperson, should take the time to sit down and speak with the customers instead of taking out the broom and sending them on their way.

Many of you may be familiar with this scenario: a customer gets close to the end of their current loan and they want to trade out of the vehicle, but over the past two to four years, they have done nothing to reestablish their credit but pay on the car. It then becomes difficult to secure a loan for these people in order to get them into another vehicle. Why? Because while making your payments on time is an important part of reestablishing your credit, you need more than that. Most banks like to see three to four open trade lines. Imagine if, when your customer bought the car, he or she was told to open three to four lines of credit and keep the balance below 25 percent of the credit limit and to make the payments on time. What effect would this have on your deal now? You already know the answer to this question.

Explaining what makes up a credit score is one way to educate your customer. As you can see by the chart below, a FICO score is calculated based on a person’s rating in five categories: payment history, amounts owed, types of credit obtained, length of credit history and new credit. The number-one way to raise your credit score is to pay all your obligations on time, as your payment history constitutes 35 percent of your score.

Explain the weighting factors that make up the credit score. With so much going on in the economy right now, it is wise for customers to find out where their credit scores stand, and take steps to raise them. A FICO score can range from 300 to 850, though very few reach either end of the spectrum. If you are above 750, you are in the upper echelon. If your score is below 630, you are considered high-risk and are destined for credit denials and subprime rates. Also take the time to explain how income affects their chances of getting a loan. Telling a customer they can't afford the brand new Lincoln Navigator and explaining to them why are two different things. Your customers will appreciate the extra effort.

Make sure your customers know that they are legally entitled to one free credit report each year from each of the three credit reporting agencies. There are plenty of Web sites that claim to be free, but I suggest using www.AnnualCreditReport.com. You can also provide your special finance customers with this Web site, www.creditcards.com/bad-credit.php, which allows them to apply for credit cards that can help reestablish their credit.

Remember, specializing in second chance finance is more then just putting a deal together. It's about educating your customers. Will everyone who comes in get financed? No, but do everything possible to educate your customers despite their credit circumstances. What I am suggesting is simple and will certainly create lifelong customers. 

Vol 6, Issue 2