Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she's here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at

Dear Thea:
How do you turn down an applicant for credit? Between my sales rep and the applicant, I find myself almost apologetic for their bad credit and sometimes offering to take a chance that I really don't want to. How do you professionally and tactfully, handle this?
Signed, Awkward in Arkansas

Dear Awkward:

Just because your sales rep has a new pet rattlesnake doesn't mean you have to play with it. You have to hit this one head on. No means NO. Or in the world of credit, NO means don't drag this back up to my doorstep for another six months. Then we can have this “discussion" again and again.

The approach will take some finesse. I try to start out with something generic that allows both parties to walk away with the least amount of embarrassment and as much dignity as possible. After all, you never know where either of you may end up.

Years ago, I wrote up a nice generic statement and posted it near my phone. It simply stated "At this time your application does not meet our current criteria. We have set you up COD and are welcome to reapply in six months." That gave me a framework for where to start. Be prepared for the barrage of "What did my references say?" "What does my credit report look like?" "Oh no, that is completely wrong." "Do you know who I am?"

Nobody likes to be embarrassed, even if they should know better. Companies with questionable credit histories know they have them. Some are oblivious, but most know. Some are hoping you won't notice or that you won't say anything and take a chance. Some think they can bully their way with the "I don't need this; I can buy anywhere" approach. The list goes on, and I gave up years ago on trying to figure out the psychology of the financially challenged.

What I do focus on, and try to get them to focus on, is the issue at hand. I deliver the blow myself and take the sales rep out of the equation. If someone has to wear the black hat, let it be credit.

Tell the applicant straight up, "At this time, based on the information we have pulled from a combination of sources, we are unable to offer you a credit account but have set you up with a COD account." Then shut up. Let it sink in and see what they say. From there the ball is in their court. If they ask for specifics, turn it around and ask if there is there anything they would like to share. If they open up and walk me through their credit history ups and downs, we can usually find a solution.

It carries a lot of weight with me if the applicant tells me up front what/where the landmines are instead of letting me discover them. If the answer is a deer-in-a-headlight look or they have no idea what could possibly be wrong or to get nasty, that tells me what I am dealing with.

If there are just one or two hurdles to overcome and you can talk through it, outstanding. If there a multiple issues and the comfort zone is not there, offer COD for six months and see how the payments go. If it goes well, no insufficient fund checks, unreasonable deductions, etc., then you may want to take a chance with a small line and see how it goes. Communication is the key to finding workable solutions in this situation.

Remember, solutions are a two-way street. If we can't start out having an honest, no-holds-barred discussion when my company is financing theirs, then perhaps that customer should go buy somewhere else. I have been blessed out more times and in more ways over the years then I can remember. One guy asked me if I was going to "act like a lady." OK, I will—just as soon as you stop being a bully and a liar.

Here’s the bottom line: If red flags are flying all over the application and your gut check is telling you this is a bad idea, stick to your guns. Accept that you will not be popular in this situation. Get thicker skin, my Awkward friend, and let that rattlesnake slither on. You can take another crack at charming him in six months.