The Three C's of Credit

The Three C's of Credit

•  Capacity--Can you repay the

credit you're granted? What's your
income?

•  Character--Will you repay the

credit you're granted? What's your
previous track record?

• Collateral--Is there tangible

Your credit is determined on the
basis of your:
♦ Credit application
♦ Credit report
♦ Credit score

                                             

property that can secure the credit

extended?

Caution: Don't rely on credit to
cover your normal living
expenses. If you're using credit
to pay for normal living
expenses, it should be because
it's convenient to do so--not
because you don't have those
expenses planned for in your
budget.

Debt
Types of debt
♦ Secured--Backed up by a lien on collateral.
Examples include a mortgage, a car loan, or a
credit card secured by a bank deposit.
♦ Unsecured--Not collateralized. Examples
include personal installment loans, student
loans, and most credit cards.

Important considerations
♦ Amount--The larger the amount you borrow, the larger your
monthly payment.
♦ Term--The length of time you have to repay the loan. Longer terms
may mean lower monthly payments but larger total interest charges.
♦ Rate--The higher the rate, the greater the total interest charge.

Source : Kramer Financial

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