You may think you’re the picture of credit perfection, but your creditor is looking at you very differently. When applying for credit, a reputable to creditor will check your character, capacity and collateral by reviewing your credit history. This may also require that you give a detailed list of your assets and current debts.
CharacterWhile your character sees you running into a burning building to save your neighbour’s dog, your possible creditors don’t care. They want to know about your credit character and will look at your credit history to do this. Do you default on payments? Are you blacklisted or ever filed for bankruptcy? This doesn’t mean that you’re the sort to start the fire on your neighbour’s house, it does mean your creditor will think twice before giving you credit.
CapacityIf you can’t afford to pay off your credit, your creditor won’t grant you any. To determine whether or not you can afford to pay for it, they will review your income through your payslips and bank statements. They will then balance this against your current
debt to see how much disposable income
you have left to pay them back. This will also give them an indication of how much credit you’ve applied for. Too much makes you a risk.
CollateralIf you have a lot of credit and your credit history is not so hot, then your creditor will look at your assets as collateral. If you use collateral to secure credit, you are signing over your possessions to your insurer in case you default on payments. No possessions with bad credit history and too much credit means you won’t get credit.