Credit and the Five “C”s of Credit: What Lenders Look For Information is based on text from Business and Personal Finance by the McGraw Hill Company
1. Character • Will You Repay the Loan? • Are you trustworthy and stable: • Have you used credit before: • How long have you lived at your present address? • How long have you held your current job? • Request personal/professional references
2. Capacity • Can you repay the loan? • What is your job, and how much is your salary? • Do you have other sources of income? • What are your current debts? • **These things will affect your ability to repay the loan.**
3. Capital • What are your assets and your net worth? • If you lose your job will you have enough money to repay the loan? • What are your assets (items of value your own)? • What are your liabilities (debts you owe)?
4. Collateral • What if you do not repay the loan? • What assets do you have to secure the loan (car, boat, house, etc.)? • Do you have any other assets, such as savings or bonds?
5. Credit History • What is your credit history? • What does your credit report say about you? • Do you pay your bills on time? • Have you ever filed for bankruptcy?
Summary • Creditors use different combinations of the Five Cs. • Some set very high standards while others will restrict the types of loans offered.