Have you ever wondered how banks or other financial institutions determine whether or not you qualify for a business loan? They check your creditworthiness! Like many people, you may think your credit score is just a number. The 3c’s is a standard formula used to determine the likelihood of a borrower repaying their loan successfully. What Do The 3 C’s Mean? The three Cs of credit stand for character, capital, and ability. Read on to find out what each cs is about.


To examine your character as a borrower, the creditor looks at your debt history. How well have you met your loan repayments? Were you a willing borrower or a difficult borrower?

If you were a difficult borrower, was it because you lived beyond your means, or did you simply refuse to prioritize repayments of your previous loans? Also, showing that you’ve been honest by providing truthful information about yourself when applying for a loan could work in your favor. If you can show stability by staying in the same rental home or at the same job for a long time, you also increase your chances of being approved.

The bottom line here is that to show good character, you have to show that you can spend wisely. This way the lender knows you have the kind of honesty, reliability, and integrity they need to ensure you approve the right person for the loan.


Capital in this context is what lenders use to determine how viable a candidate you are. Your net worth helps financiers build your capital. A creditor will also want to know what collateral or assets you have with your income. This includes your bank accounts, investments like stocks, mutual funds, bonds, real estate, and other assets. Low net worth means you may find it difficult to repay the loan. A wealthy borrower is more likely to obtain a loan because lenders are more confident that these assets can be liquidated if the borrower experiences financial difficulty.

For example, if your net worth is very low and you are still applying for a $30,000 loan, chances are you won’t be approved. As another example, when applying for a car loan, you may be asked to pledge the new car as collateral. If you want to buy a house, you must put up the house as security. Once you have successfully repaid the loan, full ownership will be transferred to you.


Capacity refers to your ability to repay a loan and the amount of debt you can comfortably handle. The lender will verify that you have worked regularly at a job that is likely to provide sufficient income to fund your loan. Revenue streams are analyzed along with other obligations that could affect payment. For example, if you apply for a loan that requires you to pay $4,000 per month, do you have enough income or assets to make the payment in addition to your other monthly obligations?

Lenders use the debt-to-income ratio to measure the likelihood that you will repay the loan. You want to know what your monthly income is and if there is any additional income from bonuses, dividends, or rental income. The debt-to-income ratio is calculated by adding up all your existing monthly debts, such as rent or mortgage payments, car loan payments, or credit card payments, including the monthly item payment you want to fund. This total is then divided by your income.

Most banks would be uncomfortable if you’re spending more than 35-40% of your revenue on servicing debt. Most lenders have established minimum requirements for loan applications. The more you earn in a year, the more qualified you are. But even if you have a high income and your debt is also high, lenders may be reluctant to lend you more money.

Why Are The 3 Cs Important?

It’s easy to dismiss the 3 Cs and say they don’t matter. But given how important it is to lenders, you should examine your finances before applying for a loan. When you go to a creditor for a loan, it means you have a financial shortfall. If so, wouldn’t you want to make sure you’re doing everything you can to make sure you increase your chances of getting approved?

Some Of The Ways You Can Help Build Your 3Cs Are:

Meet Your Financial Obligations

Meeting your current financial obligations is key to improving your credit score. To do this, pay your bills, taxes, and other financial obligations on time.

Plan Wisely

The national and global economy can be very unstable. This can affect your ability to repay your loans and manage your expenses. Smart planning will reflect in your financial history and put you in good standing with lenders.

Consider The Amount of Collateral You Have

In case you don’t have enough collateral to secure your loan, consider taking out a smaller loan and ask to pay it back within a reasonable time frame.

When you seek business credit, it helps to ensure you get your finances in order. This will increase your chance of succeeding in your loan application, succeeding in growing your business, and succeeding in your financial and personal growth. If you are applying for a loan for your private or personal use, you can work on building your financial history in exchange for good credit. In the long run, you’ll have the financial security to fall back on when times get tough, and you’ll also increase your chances of getting that loan fast.

If you’re planning to get a loan, it is important to put your financial house in order. You’re likely not going to be able to do this alone, you will need the help of experts to walk you through. At Reb0und, our counselors will provide you with all the advice and help you need and ensure you excel in all the aspects so that you can get approved immediately. Call us on 800 852 5049, send us an email at contact@reboundfromdebt.com, or fill out a contact form here with www.reboundfromdebt.com/schedule-a-call/