Tricks and Treats of Building Credit

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When you apply for credit the issuer of the loan or credit limit evaluates a number of factors to determine your “creditworthiness”.

Along with credit reports, which will be discussed later, lenders determine whether or not to issue you credit based on the following criteria:

The Five “C’s” of Credit:

  1. Character:  Are you honest and reliable at paying obligations? To determine this, the lender will look at:
    1. Length of time at present address
    2. Renter or homeowner
    3. Age (legal age for contract
    4. Previous credit history
  2. Capital: Do you owe more than you own?
    1. Do you have savings accounts, investments, or real estate such as a home or land
    2. Did you make a significant down payment on the item you wish to finance?
  3. Collateral:  What items of value could the lender liquidate in the event that you were unable to pay the debt?
  4. Capacity:  Can you afford to pay? To determine this, the lender will look at:
    1. Length of time on the job
    2. Income
    3. Other debt
    4. Checking/Savings account
  5. Conditions: What are the current economic conditions? To determine this, the lender will look at:
    1. Federal Prime Interest Rates
    2. Stock Market
Your “Creditworthiness” Determines:
  • If you will be granted credit
  • The amount of credit you will be granted
  • The APR you will be charged
Low APRS or Interest Rates are Earned, NOT given as a Right or Entitlement. 

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