Question

A business regularly extends credit to customers for large purchases with a standard interest rate

of 5 percent. There is also a $200 installment fee that is added to the total cost of the purchase.
What should the business do before extending credit to a regular customer?
(1 point)
Ask the customer the monthly payment they can afford.
Check the customer's credit report to minimize the risk.
Nothing since the customer has a history with the company.
Require the customer to tell the business about any existing debts.

Answer 1

Before extending credit to a regular customer, the business should check the customer's credit report to minimize the risk.

Step-by-step explanation:

Before extending credit to a regular customer, the business should check the customer's credit report to minimize the risk. By checking the credit report, the business can assess the customer's creditworthiness and ability to repay debts. This helps the business evaluate the customer's financial situation and make an informed decision about extending credit.

Asking the customer about their monthly payment or requiring them to disclose existing debts may provide some additional information, but they do not fully address the risk associated with extending credit. Checking the customer's credit report provides a more comprehensive assessment of the customer's credit history and financial stability.