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The Eight Characteristics of a Preferred Client

Demographics or demographic data are the characteristics of a human population. These types of data are used widely in marketing. Commonly used demographics include gender, race, age, income, disabilities, mobility (number of vehicles available), educational attainment, home ownership, employment status, civil status, and even location. Marketing researchers typically have two objectives in this regard: first to determine what segments or subgroups exist in the overall population; and secondly to create a clear and complete picture of the characteristics of a typical member of each of these segments. Once these profiles are constructed, they can be used to develop a marketing strategy and marketing plan. (Source: Wikipedia)

In lending, demographics play an important role in the over all credit scoring to identify which groups would mostly likely default on their loans and which ones are considered as calculated risks to mitigate losses.

While the minimum qualifications to avail a loan are laid out by lenders, passing the minimum qualifications do not guarantee an approval.  Chances are better if you belong in the preferred demographic profile.

Here are some tips to help you do your own profiling to gauge your credit worthiness:

1.    Age qualification: 22-60 years of age

Preferred: 30-50 years old

Logic: This age group is “perceived” to be at the prime of their careers, probably in the middle to top management positions therefore earning higher income; Also more mature and responsible to pay their obligations.

2.    Civil Status: Single or Married

Preferred: Married

Logic: Should the borrower have a problem with the amortization, the spouse would most probably help pay the obligation.

3.    Residence Type: Owned (mortgaged), owned (not mortgaged), renting, living with parents/relatives

Preferred: Owned, not mortgaged

Logic: More stable and less expenses for rental or home mortgage.

4.    Source of income: employed or self-employed (sole proprietorship)

Preferred: Employed in the top 10,000 corporations

Logic: Regular employees of top corporations are more stable earners than employees of smaller companies.

5.    Monthly Income: At least basic salary P15,000 for employees; At least P 50,000 net income for self-employed

Preferred: At least P50,000 for employes and P100,000 for the self-employed.

Logic: self-explanatory. 

6.    Position/Designation: Regular employee

Preferred:  Middle to top management position

Logic: They normally have longer work tenure and higher income.

7.    Work Tenure/Years of business operation: At least 1 year with current company for employees or at least 3 year business operation for self-employed

Preferred: At least 3 years employed with the same company or 5 years profitable in the same business for self-employed.

Logic: longevity is stability

8.    Credit History: with or without credit card for employees; must be a credit card holder for self-employed

Preferred: Credit Card Holder for at least 1 year with at least P40,000 credit limit with no more than 80% utilization for employees; Credit card holder for at least 1 year with at least P100,000 credit limit with no more than 80% utilization.

Some banks approve loan applicants with previously cancelled credit cards and adverse loans for as long as the balance has already been settled for at least 1 year and you have a certificate of full payment (clearance) from the credit card issuer.

Logic: it shows your credit history; how you handle credit and your timeliness of payment.

If you hit all eight items above, then you're definitely a preferred client! You most likely have a 90% chance of getting a credit approval. The remaining 10% will depend on your credit history (previously cancelled credit cards or other adverse loans will give a negative score) and of course the result of the information verification. 

Information verification or the credit investigation is also a very important factor for lenders to arrive at a credit decision. A discrepancy found during the process could mean a declined application like in some weird cases when the client could not remember his/her home address or birth date during phone verification. Other cause could be a discrepancy found on the documents submitted like when the income on pay slips does not tally with the income on the certificate of employment or the ITR.

Good luck!