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

Your financial trustworthiness is character. It’s great if a lender knows you or your family personally. This is more often determined by your credit score. Whether you’ve made payments on time can play a big part here.

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 is your cash flow. You have to have enough money to handle the debt you’re asking for. They look at your income and expenses for each month. Lenders rightfully want to make sure you have enough money to make the payments.

Capital

Capital is your net worth. Even if you’re making plenty of money each month, if you have way more debt than you have assets, you’re a bigger lending risk. Having more assets shows you’re worthy of more credit.

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

Conditions are actually market and economic conditions. With the fall, consolidation, bail out, etc of many large financial institutions, lending guidelines have become tighter.

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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