• Clint Engel

Will a bump in credit scores lead to a bump in furniture sales?

HIGH POINT — This summer, millions of consumers will get a boost in their credit scores as the three major credit agencies start leaving off certain negative information when important details are lacking.

And that begs the question: Will better scores lead to more consumer loans and more furniture sales? Early answers vary from “no” to “maybe” depending on who you talk to.

The move is part of a reform by credit agencies TransUnion, Experian and Equifax, which have come under pressure from state governments and consumer groups to fix mistakes that have driven down some credit scores. In July, the agencies will remove tax liens and civil judgments unless three pieces of critical information are provided with them — name, address and date of birth or social security number.

According to several news reports, the changes could bump up the scores of some 12 million people, possibly making it easier for them to get loans for everything from, say, homes to furniture.

But whether or not this will have much impact on the furniture industry remains to be seen, and early opinions are mixed.

“I don’t think it makes any difference,” said Jerry Epperson, industry analyst and managing director of Richmond, Va.-based Mann, Armistead & Epperson.

“All it does is change the relative ranking, and the lenders, I think, are going to see through any of these minor adjustments anyway. If you’ve got something really bad outstanding on your credit, they’re going to know about it. And if they don’t, they shouldn’t be in the credit business.”

It shouldn’t mean much to stores that carry their own receivables, either, he added. In many cases, these retailers sell the high quality paper for top dollar and keep the more marginal loans.

“The local store manager knows the community and knows the people, and he’s probably a better judge of who he can lend to and who he can’t than the credit agencies, anyway,” Epperson added.

Keith Koenig, president of Tamarac, Fla.-based City Furniture agreed, saying, “I don’t expect this to affect our industry much.”

“Finance providers like Synchrony, who we use, are quite smart and will build this change into their scoring process.” It’s probably a stretch to think the higher credit scores will lead to more furniture sales, he said.

But Charlie Malouf, of Fort Mill, S.C.-based Broad River Furniture thinks even a little score boost potentially could open the door to more furniture purchases. Since looking into the issue, the president and CEO of the Ashley HomeStore licensee said he saw one estimate that suggests 6% of consumer will see a 20-point increase, and there are potentially 700,000 more people who could see a 40-point bump. That’s bound to help consumers applying for credit, he said.

“Even if it’s not a significant change, I believe we’re playing a game of inches here … and every little bit helps,” he said.

“This is a numbers game, and we need to astutely manage our businesses around comprehension of these types of numbers that can impact our customers’ buying power.”

A representative with Well Fargo, one of the industry’s largest consumer credit providers, decline to comment for this story.

Do you think the credit scoring changes will impact the industry or slide by unnoticed? Contact Senior Retail Editor Clint Engel at cengel@furnituretoday.com with your take or post a comment below.

Clint EngelClint Engel | Senior Retail Editor, Furniture Today

Please feel free to email or call me with all of your retail news and tips, including expansion news, successful merchandising and marketing strategies and anything else you would like to see covered by Furniture/Today.  Contact me directly at cengel@furnituretoday.com or 336-605-1129.

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