Credit Policies & Procedures

Any company that sells products and services on credit will have some type of credit policies and procedures in place. If the policies are too lenient or too strict, they will have a negative impact on their ability to operate profitably and stay competitive within the marketplace.

Ability to Pay

A company extending credit to a consumer will first look at the prospective client's ability to pay. The company will look at the amount of total income in relation to debts owed.

Willingness to Pay

Organizations also take a look at a customer’s willingness to pay. They will review your credit report to see how you paid your debts in the past. Anyone with an excessive amount of past-due debts may be denied credit.


The next criteria looked at is the customer's stability. The longer you have been on your job and at your residence, the better.

Scoring System

Some companies use an automated credit scoring system. If your application does not score a certain number of points, you may be rejected automatically without a live person reviewing your application.


If your credit file has bankruptcies, judgments, liens, charge offs, bad debts, foreclosures and collection accounts, there is practically no chance of your being approved for credit. Credit policy can refer to credit extended to a consumer or business.

Credit Procedures

Companies commonly offer terms of 2/10 or net 30. A buyer can pay the invoice in 10 days and receive a 2 percent discount or the balance in 30 days and receive no discount. If an account becomes delinquent, a credit hold can be placed on an account to prevent further purchases. Overdue accounts can also be sent to a collection agency for further action.