Your “Character” Affects Your Ability to Get a Loan
When searching for a car loan, it is easy to feel like all that really matters is your credit score. Lenders qualify people for loans based on their credit scores, and many offers are limited to those in certain credit score ranges. But your credit score is only one of several factors that lenders consider. They also look at your capacity to pay back your loan, the collateral of your car, and even your character. It’s these four factors, credit scores, capacity, collateral, and character – collectively known as the Four C’s of Credit –, that usually determine if you will get a loan.
Perhaps the least understood credit factor is “character.” If it seems that character is less concrete than credit scores, capacity, or collateral, that’s because it is.
Let’s look at what this term means in the context of lending.
Character and Loans
Everyone has a story. Lenders understand this reality, and that is why most of them want to know your story when you apply to get a car loan. They learn about some of your story from your credit report, but they get the rest of the story through what you have to say about your financial history. Lenders want to see how your character plays into the other Four C’s of Credit.
For example, if your capacity to pay a loan is limited because your income has gone down, lenders still want to hear about how you have always made your payments or how you’ve lived in the same home for 15 years.
Or if your credit score has fallen because of a unique hardship or family tragedy, lenders want to know the whole story because they may decide that your hardships do not reflect upon your true financial responsibility.
Lenders do not approve car loans based on character alone. However, if a lender is on the fence about a car loan application, then they usually look at an applicant’s character.
When you apply for a car loan with IFS, your dedicated Finance Advisor will take the time to listen to your story and to discuss your financial history. We consider your entire financial situation when we work to match you with a loan that meets your needs. So, if you are ready to buy a car or refinance your vehicle, we are ready to listen and to help.