The 3 C'ss

Capacity, collateral and credit. Together, these "three C's" help a creditor decide whether to grant you credit.


Capacity is based on your income. Your capacity is your ability to make loan or credit card payments. This is critical to your being granted loan or credit approval, especially when applying for a mortgage.

Together, the "three C's" help a creditor decide whether to grant you credit.

Your debt-to-income ratio is used to determine your capacity. You need to know your total indebtedness to calculate your ratio.

All your available cash and the value of any property you own are considered part of your capacity. This includes all savings, money market funds, investments and assets. This shows creditors that you have other ways to pay your debts besides your income.


Collateral is the value of property that's pledged as security to pay a debt. If you borrowed money to buy a car, then the car is considered collateral for the loan. If you couldn't make your car payments, the car would be repossessed by the lender. The lender can sell the car to repay the loan. In the case of a mortgage, the home you buy is considered collateral.


Your credit report is carefully reviewed every time you apply for credit. Your creditworthiness depends on a good credit history. Make sure you pay your bills on time to minimize late payments on your credit report. Also, try not to apply for too much credit. Don't have too many credit cards or lines of credit open at one time.

Thinking like a lender


    Fannie Mae
    Freddie Mac
Ginnie Mae


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