• Taylor Perry

Building Credit | Part Two: The 3 C's of Creditworthiness

Updated: Oct 2

If you are seeking guidance on how to establish or repair your credit, our four-part blog series on building credit is for you. If you missed last week’s post, click here to read about the basics of credit. This week’s post focuses on the “3 C’s of Creditworthiness.” Keep reading to learn about how lenders determine your creditworthiness and how you can improve it.


Whenever you apply for a line of credit, potential lenders decide whether to approve or deny your application based on your creditworthiness. This measurement is based on your credit report, credit score, and payment history. These three factors give lenders an idea of how likely you are to repay your debts.


Your credit history may also be taken into account by other entities, such as cell phone providers, insurance companies, cable providers, and even potential employers.


Think of creditworthiness in terms of “The Three C’s”:

  1. Character

  2. Capital

  3. Capacity


Character: Will you repay the debt?

Creditors want to know that they can count on you to pay your debts. To evaluate your reliability as a borrower, potential lenders examine a number of factors:

  • Have you responsibly used credit before?

  • Do you pay your bills on time?

  • Do you have a good credit report?

  • Can you provide character references?

  • How long have you lived at your current address?

  • How long have you had your current job?


Capital: What if you don’t repay the debt?

Creditors may seek information about whether you have valuable assets that could be used to repay your debts in the event that you become unable to do so using your regular income. These assets can include real estate, savings accounts, or investments.


Capacity: Can you repay the debt?

Creditors are unlikely to offer credit to an individual who is unable to prove gainful employment. Factors that go into determining your credit capacity include:

  • Whether or not you have a steady job

  • Your salary or hourly wage

  • Your current living expenses

  • Your current debts

  • The number of dependents you have

Establishing and maintaining your creditworthiness is absolutely essential to your financial health. A high level of creditworthiness makes you more likely to be approved for a loan or credit card, qualifies you for lower interest rates, and can even affect other facets of your financial life such as housing rental, employment, and securing utility services.


Now that you’ve learned about the “3 C’s of Creditworthiness,” take a moment to examine your own credit history from the perspective of a potential lender. What elements of your financial past might be hurting your creditworthiness? Evaluate how you can improve your creditworthiness in the eyes of lenders, make a game plan, and take the steps to make it happen.


To learn more about how you can continue establishing a good credit history, stay tuned for our next blog post, Building Credit | Part Three: Credit Reporting & Scoring.


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Seymour & Perry, LLC

Certified Public Accountants & Consultants

1551 Jennings Mill Rd #400A

Watkinsville, GA 30677

P: (706) 549-8197

F: (706) 546-1030