Consumer Credit Repair: 5 C’s Of Good Credit
To figure out how to do consumer credit repair, there are five areas lenders look at. They all start with C: character, capacity, capital, collateral and conditions.
Character
Character refers to how well lenders can trust you. If they know you personally, that’s great. Oftentimes, this is determined by how well you’ve made payments on time.
Reports of 30, 60 and 90 day delinquencies don’t look good on your credit as you can imagine. Every negative entry counts against your credit score. A report to showing all accounts in good standing is the goal in working toward repairing consumer credit.
Capacity
Capacity is the ability to make the payments. It’s essentially your cash flow. If your expenses are close to your total income, they won’t want to lend you more money because you won’t be able to pay it back.
Capital
Capital is your net worth. Even if you’re making plenty of money each month, if you have way more debt than you have assets, you’re a bigger lending risk. Having more assets shows you’re worthy of more credit.
Collateral
Collateral secures the debt. Some loans like mortgages are backed by the promise to return property if the loan is defaulted on. If there’s something to get back, there’s less risk to the lender. The last thing the lender wants is to have to deal with a returned house or car but it’s still less risk if there’s that incentive to stay current.
Conditions
Conditions are actually market and economic conditions. With the fall, consolidation, bail out, etc of many large financial institutions, lending guidelines have become tighter.
This also applies down to your local lender. If a banker is having a bad day or maybe you look at him funny, that could affect whether you’re approved or not.
To repair consumer credit, focus on the five Cs: character, capacity, capital, collateral and conditions.
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