Character, Capacity and Capital

A credit score is dynamic and can change positively or negatively depending upon how much debt you accrue and how you manage your bills. The factors that determine your credit score are called The Three C's of Credit - Character, Capital and Capacity.

The Three Cs of Credit

Your credit score is a measure of factors that may affect your ability to repay credit. It's a complex formula that takes into account how you've repaid previous loans, any outstanding debt, and your current salary.

Character: From your credit history, a lender may decide whether you possess the honesty and reliability to repay a debt. Considerations may include:

  • Have you used credit before?
  • Do you pay your bills on time?
  • How long have you lived at your present address?
  • How long have you been at your present job?

Capital: A lender will want to know if you have valuable assets such as real estate, personal property, investments, or savings with which to repay debt if income is unavailable.

Capacity: This refers to your ability to repay the debt. The lender will look to see if you have been working regularly in an occupation that is likely to provide enough income to support your credit use.

The following questions may help the lender determine this:

  • What is your current salary?
  • How many other loan payments do you have?
  • What are your current living expenses?
  • What are your current debts?
  • How many dependents do you have?