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Consumer Credit Repair: What They're Looking For
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
Lenders need to know how well they can trust you. That's what they mean by character. A personal relationship with a lender is great. Otherwise it's usually up to your credit report. Late payments don't show good character for example.
Credit cards especially report 30, 60 and 90 day delinquencies to the credit reporting agencies. Each negative entry counts against your credit score. If it's not already there, you'll want your report to show all accounts in good standing to repair your 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 what they take back if the loan goes into default. Credit cards are unsecured but a mortgage is secured by real estate. While lenders don't want to have to deal with real estate or vehicles personally, having those as collateral is less risk for them.
Conditions
The conditions are market and economic conditions outside your control. With the recent economic recession, lending guidelines have become more strict.
This can also apply to your local bank. If a banker is having a bad day, that's a potential condition that could affect whether you're approved or not.
To repair consumer credit, focus on the five Cs: character, capacity, capital, collateral and conditions.
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