The 5 C’s of Credit - Credit and Finance Essay

The five C’s of Credit are; Character, Capacity, Capital, Collateral and Conditions.

The five apply to me and my obtaining credit in the following ways:

Character is a trait. You can have a bad character and be known to be disloyal and a liar. I am honest in my dealings and very loyal. In applying for credit, having a good character has helped me obtain credit. Simply because they believe what I am saying and I have documentation to back it up. Let’s say I bounced checks all over town, they would probably hear about it and not want to grant me a loan.

Capacity is a term that illustrates capability. I am able to pay back loans, or make payments on services and goods. I have to prove I have enough income to verify this when applying for credit cards, loans or wanting to make installments on goods or services. I won’t get a loan or such items, if I don’t have the future income to make the payments on them. I just don’t apply for things or money I know I can’t repay.

Capital refers to my credit currently. Do I have investments or can I pay on what debts I owe already?? These are questions they ask. What is my net worth?? Do I have savings?? This has helped me obtain a loan through financial services for my home, Christmas money, credit cards, student loans, and much more. I think my capital is good.

Collateral is assets. I have had to put my flat screen up as collateral when I applied for a loan through Chillicothe. I had to have something of value, in case I didn’t repay the loan.

Conditions are the terms of agreement in Credit. If you miss a payment what are the conditions?? I have been late and had to pay late fees before. Thank goodness I never lost any item or had one repossessed.

I think I have pretty good credit. All of these C’s of Credit help you to obtain credit and are deciding factors. They have to have something to go by to approve credit. Credit is built and helps you obtain the things you want now and in your future.