What's Important to Lenders

Most lenders look at the five "Cs" of credit before granting a loan or issuing a credit card:

1. Character is a reflection of your stability and willingness to repay credit obligations.

• Have you used credit before and paid it back on time?
• Is your application completed accurately and honestly?
• Have you moved or changed jobs often?

2. Capacity is a look at your earning power, current income, and credit commitments. Can you really afford a loan payment now?

3. Capital is your net worth (the difference between what is yours, what's free and clear, and your debts). This includes an in-depth look at your total financial situation, including the value of your home and other assets.

4. Collateral is an item of value you own that can be promised to the lender. If you don't repay your loan, the lender has the right to take your collateral. When you pledge collateral, you're more likely to pay back the loan because something you value is at stake.  Since the lender has less up-front risk, they may offer you a larger loan or a lower interest rate.

5. Conditions include the national and local economic picture. Are there a lot of layoffs or are employers hiring more people?