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
Lenders need to know how well they can trust you. That's what they mean by character. A personal relationship with a lender is great. Otherwise it's usually up to your credit report. Late payments don't show good character for example.
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
Your net worth is what's meant by capital. Someone with all debt and no assets isn't usually a good prospect for lenders. You've probably heard that they typically lend money to people who don't need it. That makes sense from a lending standpoint. If someone has shown they can build up assets with debt, you'd be happy to give them more.
Collateral
Collateral is something to secure the debt. Typically, loans are secured by property such as real estate or vehicles. If there's something to get back should you default on the loan, there's less risk to the lender.
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.
To repair consumer credit, focus on the five Cs: character, capacity, capital, collateral and conditions. - 29866
Character
Lenders need to know how well they can trust you. That's what they mean by character. A personal relationship with a lender is great. Otherwise it's usually up to your credit report. Late payments don't show good character for example.
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
Your net worth is what's meant by capital. Someone with all debt and no assets isn't usually a good prospect for lenders. You've probably heard that they typically lend money to people who don't need it. That makes sense from a lending standpoint. If someone has shown they can build up assets with debt, you'd be happy to give them more.
Collateral
Collateral is something to secure the debt. Typically, loans are secured by property such as real estate or vehicles. If there's something to get back should you default on the loan, there's less risk to the lender.
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.
To repair consumer credit, focus on the five Cs: character, capacity, capital, collateral and conditions. - 29866
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