What are the three C’s of credit?

Character, Capital and Capacity – The Three C’s of Credit

There are a few parameters through which one’s creditworthiness can be measured and contribute to the credit score. The higher your credit score is; the lower is the risk you will have to pay the next time you apply for a loan. The Three C’s of credit are those parameters. The three major credit are the character, capital and capacity. There are other factors as well such as your previous loans, current salary and unpaid loans. These are some common factors that are checked by the traditional lenders and this process of checking is known as ‘hard credit checks’. Let’s get into details of all the C’s of credit.

Character determines your honesty to repay the loan on the basis of repayments of earlier loans or credit availed, your utility bill repayments, duration of your stay at the current job, how long you are living at your present address, etc.

Capital helps the lender to determine the overall properties or assets that you possess such as real estate, investments or savings, automobile, etc.

Capacity tells about your ability to repay your loans or credits depending on your current salary, whether you have a steady income, the number of persons in your family, other loans that you are yet to pay, etc.

Why Payday Loans don’t affect your credit score?

Payday loans are no credit check loans and hence, your credit score is nor checked neither reported to the credit bureaus. But, sometimes when you are unable to repay your loan then the lenders or creditors sell your debts to the debt collectors.