The Three C’s of Credit

Keelin Billue Gubbels Mortgage, New Home Buyer

To get a loan, you should have a good credit score.  Your score is based on a variety of factors.  The Three C’s are the general factors to keep in mind to develop and keep a great credit score.  They are Character, Collateral, and Capacity.


Character

This is basically a lender determining if you will meet your financial obligations.  Charater is based on your credit history.  Lenders look to see if you have used credit before, if you payed bills on time, how long you have lived at your current address, and how long you have been at your current job among other things.  All of this is part of your credit score.

Collateral

What valuable assets such as real estate, personal property, investments, or savings do you own?  A lender wants to protect itself in the case that borrowers will be unable or unwilling to pay loans.  For example, a car loan may require the car as collateral.  Your collateral is part of your credit score.

Capacity

This is your ability to repay the loan. Lenders look to see if you have been working regularly in an occupation likely to provide enough income. What is your current salary? How many other loan payments do you have? What are your living expenses? Do you have any current debts? How many dependents do you have?