The Three Cs

When you apply for personal loans, there are several things that banks consider. They do their best to get an accurate picture not only of your financial state, but also of what kind of a person you are. And while no amount of research can tell a bank who or what you are inside, or even whether or not you will honor the terms of any agreement you make with them, there are three things in particular, often called the “3 Cs,” that banks look for when considering you for a personal loan. Do your best to make sure your 3 Cs shine, and they will take care of you when it comes time for you to borrow money from the bank.
Character
Believe it or not, the bank wants to know what kind of a person you are. Unfortunately, they don’t have forever and a day to get to know you personally, so they have to rely on your public record. On particular, they like to run a background and criminal record check. They want to know if you’ve been in trouble in the past and, if so, why. That isn’t to say you’ll never be able to get a loan if you’ve run afoul of the law, but it does make it a bit more of an uphill climb, especially if any crimes you’ve committed are financial in nature.
Capacity
Of course, banks want to know if you have the ability to repay any personal loans they make to you according to the terms set forth in the loan. This is based on your income and your debt to income ratio. In other words, they want to make sure you are making enough money, and that you don’t already have too much money going out in payments to meet your needs.
Credit Score
There’s been a lot of hype about credit scores lately, but it boils down to this. Pay your bills on time, and you’ll have a good credit score. If you do fall behind on a bill, pay it as soon as you can. If you can’t pay it in full, pay something on it. All of these things show up on your credit score, and paying late or partial payments is a lot better than paying nothing at all.