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  • Feb 7th, 2010 8:25 am
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[OP]
Jr. Member
Oct 15, 2008
166 posts
3 upvotes
Vancouver

The 5 Cs of Credit

If you want to know the factors that all banks look at to determine whether they will lend you money, from a credit card to a mortgage, then you should know about the 5 Cs of Credit.

These are the factors that all adjudicators and underwriters look at when evaluating whether they will let you borrow the money you're applying for.
15 replies
Deal Addict
May 31, 2007
3122 posts
213 upvotes
Most of the time when I apply for credit, they don't ask what I own or what my net worth is. I have never been asked my education. It would be kind of weird if they did..

I don't think bank relationship has any affect unless there is a bad history on file.
[OP]
Jr. Member
Oct 15, 2008
166 posts
3 upvotes
Vancouver
Your net worth is very important in all credit applications. I'm surprised. Was it for a small credit card in the mall or something?

I've done many deals while working at the bank and was very successful in getting my applications approved because I knew how to structure the deals correctly. There are many situations when other factors can be used to get a deal through. I've used education, relationship with the bank, and other "weird" factors to convince adjudicators that the bank should lend my clients money. Even the applicant's family's relationship with the bank. It does work if you need to use them. Guess you need to be a banker to know. Any bankers here?

You will probably experience more of the 5 Cs of credit when you get older and the your credit applications become a lot more complex or involve a large amount of money, like a mortgage.
Deal Guru
Aug 2, 2001
13002 posts
3783 upvotes
I'm not sure this article is very accurate, when I applied for my secured line of credit against my home on multiple occasions, which was for well over 100K, it was never discussed what my assets/networth was.

As well, I've never been asked this for any of the high limit (10K+) credit cards I have received.


It's nice to have an explanation for people of some of the factors, however much of this article appears to be opinion-based which can cause confusion amongst the readers because their situation may be different when they go to apply for a large sum of money.
Deal Addict
May 31, 2007
3122 posts
213 upvotes
Maybe the application gatherers are trained very well. I'm sure the underwriter looks at that stuff, but some of the people that process it to pass along for decision, don't even ask. Maybe it's not important for small credit.

I was surprised, I had to bring it, but it seemed like they didn't care. I believe this was for a LOC, (pre approved) and car loan.
Newbie
Nov 29, 2008
64 posts
1 upvote
Markenstein wrote:
Jan 21st, 2010 2:10 am
If you want to know the factors that all banks look at to determine whether they will lend you money, from a credit card to a mortgage, then you should know about the 5 Cs of Credit.

These are the factors that all adjudicators and underwriters look at when evaluating whether they will let you borrow the money you're applying for.
you must have worked for BMO thats how they evaluate credit.
Deal Addict
Feb 4, 2008
3108 posts
169 upvotes
I am going to disagree that nat worth has much to do with getting a mortgage.

You and essentially get a 100% LTV with a 650 beacon and as long as you don't have a negative net worth you are fine.
www.mortgagecalculatortoolkit.com (cut and paste it)

Do your mortgage math correctly!
[OP]
Jr. Member
Oct 15, 2008
166 posts
3 upvotes
Vancouver
dantheman7 wrote:
Jan 22nd, 2010 6:14 am
you must have worked for BMO thats how they evaluate credit.
RBC, TD, CIBC, Scotia. Every lender follows the same exact lending guidelines (though they might have varying lending policies). The 5 Cs are taught in every financial course and is an industry standard.

I have never worked or banked with BMO.
Newbie
Jan 24, 2010
12 posts
Calgary
Yes, they teach you the same thing at TD Canada Trust. I think every bank is like that then.
Deal Addict
User avatar
Jan 22, 2008
2576 posts
212 upvotes
This is not the case with a lot of people I know who got their mortgage last year. Their net worth is so low yet were approved for mortgage from 300 to 450k
Banned
User avatar
Jun 19, 2006
9349 posts
42 upvotes
casperr wrote:
Feb 6th, 2010 8:48 pm
This is not the case with a lot of people I know who got their mortgage last year. Their net worth is so low yet were approved for mortgage from 300 to 450k
CMHC! :( Canada's sub-prime lender.

Anyways, which of the 5 C's matter the most, depends on the type of loan one is requesting.

Banks that don't scrutinize the 5 C's carefully on loans they make, are ones that investors should avoid buying stock in, or even lending to.

In another thread, someone said, "BNS were total dicks for verifying my income". To which, I responded, as a BNS shareholder, "horray, my company is being responsible!"
"I worked with several H1B employees that were/are borderline ********. One of them wanted to spray an electrical patch panel with solvent to see if it would make the “network go faster”". <--- lol (source)
Deal Expert
User avatar
Dec 11, 2005
18563 posts
1008 upvotes
I wish OP would stop plugging his blog in here...

It's starting to become borderline violation of RFD advertising policy IMO.
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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