What is a Credit Application?

A credit application is a standardized form that a customer or borrower uses to request credit. It may be completed using a paper form or online. The form contains requests for such information as:

The amount of credit requested
The identification of the applicant
The financial status of the applicant
The names of credit references
Standard boilerplate terms and conditions

A sample credit application form appears in the following exhibit.

A credit application may also contain a personal guarantee commitment, which requires a signature by the applicant. When this clause is present, the credit application becomes a legally-binding document that the seller can use to enforce payment from the applicant.

The credit application form is issued by a supplier or lender with the intent of standardizing the information it uses to make credit decisions. Additional information may be used in making a credit decision, such as a credit report from a credit rating agency and information received from the credit references supplied by the applicant.

How a Credit Application is Used

Based on the information in a completed form, a credit analyst may elect to grant or deny credit, or may impose additional conditions, such as a personal guarantee or collateral. The granting of credit through an online form is highly automated, so that the entire process may only require a few minutes to complete.