Are You Creditworthy? All About Your Scores And The Five C’s

Consumer credit is not a new invention but the internet and digital technology have enhanced the ability for lenders to know your creditworthiness. Assessing credit is big business.

Our credit scores are the number generated by FICO’s proprietary formula that put us in a range of good or bad credit. That score is based on a ton of accurate (or possibly inaccurate) information collected from banks and our financial lives that reflect on how we treat our money.

Lenders look carefully at our credit report and scores (discussed below) but to do their credit analysis They also look very closely at five C’s for households (eg mortgages) and business loans.

The 5 C’s are The characteristics of credit—character, capacity, capital, collateral, and conditions—that form a framework used by lenders to evaluate potential borrowers. They look at quantitative and qualitative factors.


As prospective customers, the bankers want to understand us as well as our credit history. They will profile us as far as our education, job, family, whether we are honest and if we have integrity.


Lenders want to know if we can pay our loans based on current cash flow. If we have other loans, how are we managing it. They will look at our budget , how much cash flow we have to pay for expenses, whether we are looking for loan for our household or a business. They will crunch numbers.


 They will look at your personal investment in the home or small business you are hoping to get credit for. Bankers are more cautious about lending 90%+ to the borrower since the financial crisis when bankers were overly flexible.


Secured loans typically have lower interest rates than unsecured loans. Lenders will look at what the asset or the colllateral  you are willing to put up when asking for the loan. A loan secured or backed by an asset is easier to get whether it is for a home, car, or a small business that may have some real estate or intellectual property.


 The conditions refer to the composition of loan (amount of down payment, type of interest rate), and what is the borrower using the loan for. The lender will also take into account what are the external factors such as economy, industry.

Seven reasons you need your credit Report and scores 1. Know where you stand before you need financial decisions. 2. Buying a home. 3. Car loans and leases. 4. College loans. 5. Check for mistakes, identity theft and fraud. 6. Getting a job. 7. Renting an apartment.