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The first of the 5 C's - Character

August 10th, 2017.

Credit is governed by what is known as the 5C’s, I will be doing a five-part blog on each of these over the coming weeks which should assist readers in understanding what it is banks look for when assessing finance applications.

5 part series:

Part 1 - Character
Part 2 - Capacity
Part 3 - Capital
Part 4 - Collateral
Part 5 - Conditions


The first of the 5 C's - Character


As the credit market tightens banks will look more closely at finance applications, and we might find that more and more frequently, what was previously approved, will not be in the times ahead.


When we look at what banks look for in a ‘perfect applicant’, perhaps the most overlooked ‘C’ is Character. Character covers a myriad of qualities which are worth detailing as they aren’t widely known:


  • Account Conduct – this basically means your accounts are kept clean. This includes having no unarranged overdrafts, dishonour fees, cash advances on credit cards, late payment fees, and the like. We are seeing in the current market that this is becoming increasingly important.
  • Stability – this can include how long you’ve been at your current residence and your current & historical employment situation
  • Repayment History – this includes repaying all of your debts on time, every time.
  • Credit History – age dependent, a lender would usually expect to see some sort of enquiries on your record by the time you are looking to apply for a mortgage – not in all cases, but in most. The state of your credit report in terms of enquiries, what lenders they are and if it is free from defaults will definitely have an influence on your application.


Applications can be declined at any stage in the process due to seeing some of the above requirements not met, particularly around account conduct. In most cases these clients met all other criteria, from Capacity, to Collateral, and everything in between. If this were the same market of circa 12 months ago, this wouldn’t have been scrutinized as much.


As the finance market tightens, it is definitely important to ensure you keep the little things in check, as these things are starting to play a big part in how banks view you as an applicant. Some of the above can relate to cashflow issues, others to purely mismanagement of funds and carelessness, in any case, it’s worth making sure you don’t fit into the wrong basket.


A helpful tip to avoid some of the above which you may not be aware of, would be to ensure you close any accounts you don’t have a need for. It is often these sorts of accounts which don’t have funds sitting in them, run into unarranged overdrafts due to fees etc.

Read all about the other C's in this 5 part series:

Part 1 - Character
Part 2 - Capacity
Part 3 - Capital
Part 4 - Collateral
Part 5 - Conditions



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Kris Pedersen Mortgages Limited

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