Managing your debt

What do creditors look for when applying for credit?

Creditors look at your ability to repay debt and willingness to do so. In some cases they may also look for a little extra security to protect their loans.

Creditors also speak of the three Cs: capacity, character and collateral.


Can you repay the debt? Creditors ask for employment information: your occupation, how long you've been with your current employer and how much you earn. They also want to know about your expenses: how many dependents you have, whether you pay alimony or child support, and the amount of your other obligations.


Will you repay the debt? Creditors will look at your credit history: how much you owe, how often you borrow, whether you pay your bills on time, and whether you live within your means. They also look for signs of stability: how long you've lived at your present address, whether you own or rent your home, and how long you have been in your present employment.


In some instances creditors also look for protection or collateral to cover their risk. In these instances they would want to know: are they fully protected if you fail to repay them? They also want to know what assets you have that could be used to back up or secure your loan and other resources you have for repaying debt other than income, such as savings, investments or property.

Creditors use different combinations of this information to reach their decisions. Some set unusually high standards; others simply do not grant certain kinds of loans. They also use different rating systems. Some rely strictly on their own instinct and experience. Others use a "credit-scoring" or statistical system to predict whether you're a good credit risk. They assign a certain number of points to each of the characteristics that have proved to be reliable signs that a borrower will repay. Then they rate you on this scale.

Different creditors may reach different conclusions based on the same information. One may find you an acceptable risk; another may not grant you a loan.


How to establish a good credit rating

When entering into any credit agreements, for example, loans, instalment sale agreements or accounts at retailers, ensure that you make payments according to your agreement.

When you apply for a loan we will check your credit record to make sure you are good at paying your bills. The credit bureaus keep relevant credit records to help lenders assess applications. To assess your application we use information from other banks and retailers, which relates to:

  • Civil court judgment’s taken against you
  • Payment histories on your accounts
  • Known fraud information
  • Default or adverse listings, for example, debts handed over to an attorney for collection or written off by your creditors.

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