Understanding Conventional Loan Credit Scores: A Contractor's Guide to Helping Customers Afford Home Improvement Projects

4-minute read | Nov 7, 2023

Providing top-notch home improvement services is becoming increasingly more expensive due to the rising costs of labor and materials. As these expenses continue escalating, customers are finding it more challenging to afford these services independently. Thankfully, affordable customer financing options are available to alleviate this burden.

However, offering financing doesn’t always guarantee that your customers will be eligible, since it is often based on creditworthiness. The good news is that Credit Karma’s 2022 member report data suggests that people with mortgages tend to have higher conventional loan credit scores than the average person.

As a home improvement contractor, you’re an expert in transforming spaces and making dream home improvement projects a reality. But beyond the work itself, understanding the financial aspects, especially how credit scores may affect project affordability, can make you an invaluable resource for your customers and help you win more projects. This guide sheds light on credit scores and how they affect homeowners looking to invest in renovations.

Understanding conventional loan credit scores

What is a Conventional Loan Credit Score and Why is it Important for Homeowners?

A conventional loan credit score is a number derived from a person’s credit history, indicating their creditworthiness. It’s important for homeowners because a higher credit score can mean better loan terms and lower interest rates.

Factors That Make Up a Conventional Loan Credit Score:

When helping homeowners understand their score, break it down into these components:

  • Payment History (35%): Timely payments boost the score, while missed or late payments reduce it.
  • Credit Utilization (30%): The percentage of credit in use compared to total available credit. Lower utilization is preferable.
  • Length of Credit History (15%): A longer credit history can be beneficial.
  • Types of Credit (10%): A mix of accounts like credit cards and mortgages is ideal.
  • New Credit (10%): Multiple new accounts or hard inquiries can lower the score.

How Can Contractors Help?

As a home improvement contractor, you can be an invaluable resource for homeowners. You can help them find the financing options best suited to their needs based on the project size. Furthermore, if your business offers in-house financing or payment plans, it is important to let homeowners know. This could be a huge benefit for those who have lower credit scores and may not qualify for traditional loans. Providing flexible payment plans can be a great way to meet customer needs and gain trust.

Tips Homeowners Can Use to Boost Their Conventional Loan Credit Score:

If your customers would like to boost their credit before moving forward with a project, you can share these simple insights with them:

  • Regular Monitoring: Encourage homeowners to use free credit report services to monitor their scores.
  • Addressing Errors: Mistakes on credit reports aren’t uncommon. Guide homeowners on disputing inaccuracies.
  • Timely Payments: Emphasize the importance of paying bills on or before their due date.
  • Reducing Debt: Paying down outstanding balances can positively impact a credit score.
  • Avoid Opening New Credit Lines: Unless necessary, opening multiple accounts in a short span can be detrimental.

Providing Guidance on Project Budgeting:

As a contractor, providing guidance on budgeting for home improvement projects can help homeowners with limited financial flexibility. Breaking down costs in a transparent manner allows homeowners to plan and allocate funds without relying too much on credit. Additionally, educating homeowners on projects that offer the best investment returns can help them maximize their home value. Ultimately, by providing estimates and highlighting the ROI of specific projects, you can empower homeowners to make sound decisions that suit their financial needs and preferences.

Navigating the complexities of customer financing while trying to run a home improvement business can be daunting. That’s where an experienced lending partner steps in. With a trusted financing partner like Salal Credit Union, you can rest assured that your business and customers will receive unparalleled customer support and service.

Partner Forward with Salal Dealer Direct

Headquartered in Seattle, Salal Credit Union has been helping members thrive for over 70 years. In addition, through our Dealer Direct contractor financing program, we team up with contractors nationwide to provide their customers with affordable financing for various solar and home improvement projects.

Since 2009, we’ve financed over 60,000 solar and home improvement projects for our member-owners through our Dealer Direct contractor financing program. We can offer some of the most competitive rates and dealer fees because we’re part of a member-owned credit union. That means our profits return to our members—and business partners—through lower rates and fewer fees.

Our Dealer Direct Financing programs feature:

  • An online loan application with fast credit decisions and a high approval rate.
  • Terms and loan amounts are available to fit various budgets and project sizes.
  • Partners pay ZERO dealer fees on our standard program.

How to Start Offering Salal Dealer Financing to Customers

We’re serious about helping your business grow with fast funding times and personalized support from a dedicated and experienced team of lending specialists. To get started, our dealer application process requires these documents:

  • Completed dealer questionnaire
  • Current income statement and balance sheet
  • Copy of business license and/or contractor’s license


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