Dimensions of Credit Appraisals
Six ―C‖ s
1. Character
You are considered to have good credit character when you live up to your financial and credit agreements. Paying bills on time and meeting financial obligations are signs of good character. Your credit score and your credit history are good ways for a bank to learn about your character or credit reputation and how well you pay your credit obligations.
2. Capacity Capacity reflects your ability to repay a loan or other financial agreement. Potential creditors want to see that you‘ll have enough cash left over after paying your fixed monthly expenses to repay a new credit or loan account.
3. Capital A potential bank also will assess your capital. Wondering if you have any? Subtract all your debts from your assets, including any property that you may own, and this is your capital. Banks and creditors like to see that you have enough capital to handle another loan or credit account before approving you for new credit.
4. Conditions Banks look at conditions such as the stability of your employment, your other debts and financial obligations, and how often you‘ve moved in the past year when considering whether to approve you for a loan. The longer you‘ve been in a job and the less frequently you‘ve moved the more stable your life conditions appear to potential creditors and banks.
5. Collateral Collateral is any property or possession that can be used as security for a payment of a debt. For example, a home or automobile serve as collateral against the loans you might take out to purchase them. Banks like collateral because it guarantees them against a total loss if you fail to repay your loan. If that happens, your collateral may be sold or repossessed to repay your financial obligation.
6. Cash Flow adequate cash flow to repay a new loan. Income in each monthAre you paid regularly, or does your income fluctuate based on seasonality or other factors? A Bank wants to make sure you have enough cash flowing your way on a regular basis so that you can pay for a new credit obligation
Six ―C‖ s
1. Character
You are considered to have good credit character when you live up to your financial and credit agreements. Paying bills on time and meeting financial obligations are signs of good character. Your credit score and your credit history are good ways for a bank to learn about your character or credit reputation and how well you pay your credit obligations.
2. Capacity Capacity reflects your ability to repay a loan or other financial agreement. Potential creditors want to see that you‘ll have enough cash left over after paying your fixed monthly expenses to repay a new credit or loan account.
3. Capital A potential bank also will assess your capital. Wondering if you have any? Subtract all your debts from your assets, including any property that you may own, and this is your capital. Banks and creditors like to see that you have enough capital to handle another loan or credit account before approving you for new credit.
4. Conditions Banks look at conditions such as the stability of your employment, your other debts and financial obligations, and how often you‘ve moved in the past year when considering whether to approve you for a loan. The longer you‘ve been in a job and the less frequently you‘ve moved the more stable your life conditions appear to potential creditors and banks.
5. Collateral Collateral is any property or possession that can be used as security for a payment of a debt. For example, a home or automobile serve as collateral against the loans you might take out to purchase them. Banks like collateral because it guarantees them against a total loss if you fail to repay your loan. If that happens, your collateral may be sold or repossessed to repay your financial obligation.
6. Cash Flow adequate cash flow to repay a new loan. Income in each monthAre you paid regularly, or does your income fluctuate based on seasonality or other factors? A Bank wants to make sure you have enough cash flowing your way on a regular basis so that you can pay for a new credit obligation
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