The Three C’s of Credit • Objectives: – Students will be able to describe the “Three C’s of Credit (Capacity, character, and collateral) and factors used to assess them. – Students will be able to evaluate the riskiness of lending to an individual in each of the three categories (Capacity, character, and collateral) – Students will be able to weigh the benefits and costs of approving a loan and make a decision to approve or deny the loan
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The Three C’s of Credit Objectives: – Students will be able to describe the “Three C’s of Credit (Capacity, character, and collateral) and factors used.
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The Three C’s of Credit
• Objectives: – Students will be able to describe the “Three C’s of
Credit (Capacity, character, and collateral) and factors used to assess them.
– Students will be able to evaluate the riskiness of lending to an individual in each of the three categories (Capacity, character, and collateral)
– Students will be able to weigh the benefits and costs of approving a loan and make a decision to approve or deny the loan
FICO Score
• FICO – Named for the score’s developer, Fair Isaac Corporation.
• FICO score ranges from 350 to 850.• Scores between 675 – 850 are
considered good credit.• Scores less than 600 are
considered poor credit.
FICO Score
• You can buy your score from one of the three major credit reporting companies:– Equifax– Experian– TransUnion
How To Improve Your Score
Establish credit by obtaining some form of loan. Be punctual and CONSISTANT! Check credit report often. Keep debt in check. Avoid excessive inquiries. Keep accounts open. Keep a healthy mix (mortgage, credit card, a car loan,
and perhaps a retail card)
Credit Score Components
Source: myfico.com
35%
30%
15%
10% 10%Payment HistoryAmounts OwedLength of Credit HistoryNew CreditTypes of Credit Used
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Lesson 3: A Fresh Start
• PAYMENT HISTORY (35%)
– Number of accounts, number paid on time, number paid late