Lenders look at many different factors to determine whether you are a good candidate for credit. Your credit score is one of the primary factors they evaluate, but they also look closely at the 5 Cs of credit. Any credit helpers can explain these to you in detail, and we’ve outlined them for your knowledge.
Character
Your credit character is important since it provides a picture of how trustworthy you are as a borrower. Lenders will look at how long your credit history is, whether you have made consistent payments on time, and whether all current accounts are in good standing. Any red flags with your credit history can make it difficult to get the best credit terms.
Capacity
Capacity deals with cash flow and helps lenders determine how well you can pay back your loan. They will analyze your current income, its stability, as well as your debt-to-income ratio. As credit specialists explain, your credit capacity will play a big role in the size of the loan you can receive.
Capital
Lenders want to know how much you are invested in the purchase so they can determine how much they want to invest in you. For businesses, that means they want to know how much inventory, equipment, and other items you’ve purchased to support it. For other people, they look at the size of the down payment you make on a house or car purchase. Many credit helpers suggest making as large of a down payment as you can afford to prove to lenders you are invested in your purchase.
Collateral
Lenders have to proceed with caution with every loan they provide. The assets you have that can be sold in the event you can no longer pay are referred to as collateral. These assets can include vehicles, homes, checking accounts, real estate, and much more.
Conditions
Conditions often are outside of your control and involve things like the economy, job stability, the current market, and more. Lenders want to know what you’ll use the money for so they can determine if the conditions are right to help you succeed.
Core Credit Solutions is one of the top credit repair companies in Los Angeles and we are ready to help your financial future. Understanding the 5 Cs of credit early on can help you build your credit and put yourself in the best possible position to receive a fair loan. If you want to understand your current situation better, pull your credit report and our credit specialists can help analyze it for you. And as always, feel free to contact us at any time if you have questions or concerns.