Many credit union lenders use credit scores or look at five critieria known as the 5 Cs of Credit before deciding whether you are trustworthy to lend money to. If you are in the market for a credit union loan, it may be best to have these Cs together to ensure that you get the low cost loan that you desire, whether that be for a car, boat or home improvements.
Capital: Most of the time you need money to borrow money. To show that you can cover the some of the loan costs is a comfort to many lenders. Showing that you have the ability to make a down payment may give the lender confidence that you are a good manager of your money and are sure to pay back what you owe on time. Owning a home or having a savings account can be evidence of capital.
Capacity: No one wants to loan money to someone who is unable to pay. Would you loan your brand new iPad to a stranger that doesn't have a way of replacing it if it were broken? Lenders want to make sure that you have more money pouring in than pouring out. Showing that you have been on a job a good while, with increases in income can make a lender, once again, feel more confident.
Character: People with deep pockets can also be irresponsible. That's why credit reports are needed. Lenders can check repayment history and reputations just by checking your credit report. They are looking for unpaid debt, the amount of debt and slow repayment--among other things. If you establish a history of paying your bills on time, you should be in good shape. Also, make sure that your debt isn't more than what you bring in. Try to keep your debt to income ratio at 50 percent or less.
Collateral: Your possessions that you can use as collateral are very important to lenders. If you don't pay them, you may have to give the lender your collateral as partial payment for what you owe. An example of this is your car. It may be labeled collateral when you sign for an auto loan. If you don't pay the car payment, the lender can take the car. With credit cards, there is not collateral; so, lenders look at the other Cs.
Conditions: Some lenders may be more lenient about past credit troubles if you can prove that are moving past a bad experience like unemployment or identity theft and are working toward rebuilding your credit history. The local economy can also be considered.
How creditworthy are you? Are you on the road to getting a low cost loan at your credit union or financial institution? If you are not sure, feel free to speak with a Unity One Credit Union loan officer at no charge.