Consumer Credit Repair: The 5 C’s
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. Oftent
Your credit report will show 30, 60 and 90 day delinquencies. Credit card companies are often the most aggressive about reporting. As you could guess, negative entries count against your credit score. You’ll want your report to show all accounts in good standing for working to repair consumer credit.
Capacity
Capacity means you have enough cash flow to handle the debt you’re seeking. They look at how much money you have coming in each month as well as how many expenses you have. Lenders want to make sure you have enough money at the end of the month to make your payments.
Capital
Capital shows that you know how to manage money long term. It’s a look at your net worth. Lenders don’t want to give money to people who need it. They want to lend to people who have shown to be able to use it wisely to build up more assets. That’s a better lending risk for them.
Collateral
Collateral is something to secure the debt. Typically, loans are secured by property such as real estate or vehicles. If there’s something to get back should you default on the loan, there’s less risk to the lender.
Conditions
The conditions are market and economic conditions outside your control. With the recent economic recession, lending guidelines have become more strict.
Smaller concerns such as your local banker’s mood that day also fall into this group. While we’d like to think your banker is always going to be professional, he’s human too.
When you’re looking to repair consumer credit, remember the five Cs: character, capacity, capital, collateral and conditions.
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