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The Five Cs of Credit

The Five Cs of Credit. What Lenders Look For. Based on text from Business and Personal Finance, 2007 by The McGraw-Hill Companies, Chapter 6, Sec. 2 pp.169-171. 1. Character. Will You Repay the Loan? Are you trustworthy and stable: Have you used credit before:

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The Five Cs of Credit

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  1. The Five Cs of Credit What Lenders Look For Based on text from Business and Personal Finance, 2007 by The McGraw-Hill Companies, Chapter 6, Sec. 2 pp.169-171

  2. 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

  3. 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.**

  4. 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)?

  5. 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?

  6. 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?

  7. Summary • Creditors use different combinations of the Five Cs. • Some set very high standards while others will restrict the types of loans offered.

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