Approval rate

In plain words

The approval rate shows how strict the lender is with the applicants it receives. It depends on two things at once: the quality of incoming applications and the lender’s own rules. A change in the rate can mean a new scoring cut-off, a new traffic source or a change in the market.

How it is calculated

Approval rate = approved applications / reviewed applications × 100%.

Example: in a week the lender reviewed 2,000 applications and approved 500. The approval rate is 25%. It is worth agreeing in advance what counts as reviewed: completed applications only, or including those rejected automatically for missing data. Different definitions give different numbers, and teams end up arguing about the figure instead of the business.

Why it matters to an owner

The approval rate links marketing and risk. Marketing wants it higher, because each approved application justifies the cost of traffic. Risk wants it lower, because each extra approval of a weak applicant becomes a loss later. The right level is the one at which approved loans pay back with a margin, and this can only be seen by following approved loans for several months.

Common mistake

Raising the approval rate as a goal in itself. A jump in approvals without a change in traffic usually means looser rules, and the bill arrives a month or two later as overdue debt. It also helps to look at the approval rate by source: one channel may bring applicants who are rarely approved, which makes its traffic far more expensive than it looks.