Work out approval rate impact instantly with clear inputs, formula shown and shareable results.
Loosening a credit policy adds volume from the weakest part of the applicant distribution, so the marginal bad rate is far worse than the portfolio average. The marginal good-to-bad ratio is the test of whether the expansion pays.
Marginal expansion
Extra approvals = applications × (new rate - current rate); split by the marginal bad rate
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.
Because the extra approvals come from just below the previous cut-off, the riskiest slice of accepted business.
It depends on margin and loss given default — a high-margin product can absorb a far worse ratio than a thin-margin one.