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Short Course
The 5 C's of credit
Lenders say there are five key traits every borrower should have
in order to obtain credit:
Character, specifically the integrity to repay the debt.
Capacity, which is the cash flow from income necessary to service
the loan.
Capital, a measure of net worth, which is the borrower's total
assets minus any liabilities. This shows the assets that the borrower
has that can generate income.
Collateral, which is used to secure the debt. A car, for example,
is the collateral on an auto loan; credit cards, by comparison are
unsecured loans because they lack collateral.
Conditions, namely that the borrower and the economy are such that
the entire deal is attractive to both sides.
- Charles A. Jaffe Boston Globe 11/29/00
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