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Let’s say you want to do consumer credit repair. Lenders will be looking at five areas. Those factors all start with C: character, capacity, capital, collateral and conditions.

Character

Your financial trustworthiness is character. It’s great if a lender knows you or your family personally. This is more often determined by your credit score. Whether you’ve made payments on time can play a big part here.

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 is your cash flow. You have to have enough money to handle the debt you’re asking for. They look at your income and expenses for each month. Lenders rightfully want to make sure you have enough money to make the 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 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

The conditions are market and economic conditions outside your control. With the recent economic recession, lending guidelines have become more strict.

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.

By: Tiffani G Peterson

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