4 C's OF CREDIT

are the four primary considerations that will affect a lender's decision to approve or decline your loan application. Known as the 4 C’s of credit: 1. Capacity - what is your ability to repay the loan? Do you have a job or another income source? Do you have other debts? 2. Character - will you repay the loan? Have you used credit before? Do you pay your bills on time? 3. Collateral - if you fail to repay your loan, is there something of value that you agree to forfeit? For example, if you are buying your first car, it could be used as collateral to insure that you will repay the loan. If you default, you lose your car. 4. Capital (accumulation) - what are you worth? Do you have other assets, such as a savings account, car, or certificate of deposit that could be used to repay the debt?

The 4 C’s of credit are key factors lenders evaluate before granting credit: Capacity (ability to pay), Character (willingness/track record), Collateral (security pledged), and Capital (net worth/financial strength).

- Used to explain the concept in accounting and business contexts.
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- Example: Teams reference **4 C's OF CREDIT** when defining terms in manuals, policies, or training materials.

- Why it matters: Improves clarity and consistency across documentation and decision-making.