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Consumer Credit Repair: The 5 C's
If you've been trying to figure out how to do consumer credit repair, there are five major C words to lenders. Those major areas are character, capacity, capital, collateral and conditions.
Character
Character refers to how well lenders can trust you. If they know you personally, that's great. Oftentimes, this is determined by how well you've made payments on time.
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 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 state of the the market and economy are the conditions. The rise and fall of interest rates and inflation are in this category. As the Federal Reserve tightens up credit to banks, consumers find it harder to qualify as well.
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.
Character, capacity, capital, collateral and conditions are the five areas to focus on when you're looking to repair consumer credit.
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