New Underwriting Criteria At Discover Will Lead To Fewer Business Card Approvals

Discover business-card applicants will find it more difficult to get approved going forward, according to a source who received a notice from Discover on Friday about the credit-card company’s new underwriting standards. According to a letter that was forwarded to me, the Discover business-card unit has made some changes to its lending criteria. As a result, Discover business-card applicants may, after applying for the card, be “asked to provide additional information in order for Discover to make a credit decision,” according to the company. The decision to tighten lending standards, according to the letter, is “due to the recent economic downturn.” Discover, which implemented the changes in mid November, says the changes will have an impact on the approval rate. Indeed, the changes should result in fewer approvals.While I’m not privy to the exact changes that were implemented, my guess is that businesses are being required to provide financial records that show they have the financial wherewithal to repay their obligations. Given the recent economic downturn that Discover cited in the letter, I’m not surprised that Discover has tweaked its underwriting model. What’s more, I’m not surprised that Discover is requiring additional information from some of its applicants. It looks as though banks and credit-card companies are beginning to do some real underwriting. I also believe that this new underwriting criteria will lead to fewer approvals for people who have been applying as sole proprietors. Indeed, some applicants with little to no business experience — and often with no real business at all — have been applying for business cards during the past five years. I suspect Discover’s new underwriting criteria will result in a significant number of declines for these people.In short, if you plan on applying for a Discover business card in the near future, don’t be surprised if Discover requires more than your word. Be prepared, in other words, to provide financial statements that back up your application.