Capacity + Character + Consistency = Creditworthy

Ask a lender to extend credit and they immediately want to know if you are creditworthy. Lenders want to be assured you can and will make good on the debt. Your credit reports and scores will give lenders an idea of how creditworthy you are by indicating how you fare on the three Cs – capacity, character and consistency.

The more you know about how capacity, character and consistency can be ascertained from your credit reports and scores, the better you can smartly manage your credit to have lenders welcome your credit application.

Securing credit hinges on a list of factors that play out on your credit reports and can be seen in your three-digit scores. The three Cs can be visible in these factors.


  • 40 percent payment history: An indication of Character and Consistency, as it highlights your established history of making payments on time.
  • 35 percent outstanding debt: Is illustrative of Capacity and Consistency, as it shows the amount you owe relative to the credit available to you.
  • 10 percent credit age: Attests to Character and Consistency, as older accounts in good standing help your credit scores.
  • 10 percent: account types: Can signal Capacity, as it reveals the kinds of credit you have in use.
  • 5 percent credit inquiries: Hints at Capacity and Character, as inquiries reveal those interested in extending you credit and those who have given you credit evident by the reporting of new accounts.

Capacity is your ability to meet your financial obligations, both now and in the future. Among the elements on your credit reports that indicate capacity are your outstanding debt, how you manage your debts, your credit mix and your recent inquiries or new accounts.

Your outstanding debt is an indication of your risk level. Using too much of your available credit can lower your credit scores. Conversely, showing significant credit available often tells lenders how adept you are at managing it and is reflected in higher scores. Your scores will fare better with credit card utilization percentages of 30 percent or less.

Opening too many accounts in a short period of time can be a red flag to lenders that you might be overextended. It can also reduce your credit scores, which could hinder your ability to be seen as creditworthy.

Lenders also look favorably on a mix of credit accounts in good standing.

“Are you varying the types of credit or do you just have a bunch of credit cards?” said Larry Smith, managing partner and owner of the Chicago-based law firm SmithMarco, P.C., which provides credit counseling services. “It’s good to show a mortgage, car loan, a few cards and other things that indicate variation.”

Steve Bollman, president of the National Association for Debt Education and Assistance, agrees. “If you only have credit cards and no installment loans, that’s not as good. It’s better to have two credit cards and a car or some other ‘paid-as-agreed’ loan, especially when you are applying for a mortgage.”

The second “C,” character, is really a matter of your trustworthiness. This can be seen in your credit payment history, which reveals if you meet your financial commitments and how prompt you are in paying your existing bills and other past debts.

Older active credit accounts paid on time, as well as recently opened accounts, are indicative that creditors find you worth the risk.

In addition to your payment history, creditors will use objective factors that indicate stability in order to gain a sense of your financial character. Information that can be gleaned from your credit reports to show stability includes how long you have lived at your current residence, whether you own or rent, and the length of time you have been at your current job. While these elements don’t factor into your credit scores, this information can help lenders learn more about you.

The final “C,” consistency, can be seen on your credit reports by examining your payment history and management of your credit accounts over time. Lenders consider years of on-time payments and consistent management of your debt levels as positives. These behaviors often result in higher credit scores and lenders extending the most favorable interest rates to those consumers.

A spotty payment history, especially numerous late payments, collection accounts, bankruptcies or notations of creditors closing or writing off accounts, connotes a higher level of risk. Negative marks consistently appearing on your credit reports can cause lenders to question your commitment to honoring your debts.

Likewise, consistently maxing out your available credit and carrying high balances month to month will negatively impact your credit scores and your ability to be seen as creditworthy. This can be disconcerting to current and potential lenders, and can result in higher interest rates should they decide to extend you credit.

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