The 4 C's of Credit Worthiness ~ Know Your Worth

Jan 07, 2021

Darling, never ask permission to wear the crown. There will always be someone who can’t see your worth. Don’t let it be you.

Now chin up and get invested in yourself.

You have decided it’s time to purchase a vehicle and where do you begin?  I know it seems like you pick an amount you can afford a month and then everything starts to form around that number. 

Well…. there are quite a few steps in between that are crucial to maintaining your money goals, getting what you want and what fits your style of living. 

First things first, get your income and expenses in check and clear out all the unnecessary costs that you have accumulated so you can get the best outcome for your future.

Then, decide on how much of what you have left over you are willing to spend on a car and all the expenses that come with it. 

Now that you have those numbers in order it’s time to find out how credit worthy you are and how much that gets you. 

Credit

Know your credit score and clean it up before you start seeking financing. Pay off some debt, dispute any discrepancies and be sure everything looks good. 

Capacity

Another number they will want to know is your DTI / PTI this is your debt-to-income ratio or payment-to-income ratio. This basically tells them how much debt you have compared to how much you earn in the form of a percentage. These numbers are how lenders measure your ability to manage monthly payments. You will want to know this as best you can before you go. Find where you stand so you will notice if you need to make further improvements and how to approach your debt and income for the future. 

Collateral 

This will be your assets that you currently own as well as the ones you are seeking to purchase. For your vehicle purchase in most cases it is the vehicle that is the collateral and if you default on your payments they take the car for payment of debt. This is why they will look at LTV , loan-to-value ratio. The LTV is the amount you want to borrow vs. the value of the item. They typically don’t want to give 100% of the value they would rather give less and in the event of a default they don’t lose any money. An easy fix for this is a down payment to offset the amount you want to borrow. 

*Important Tip: If you need to borrow more than the lender is saying it is worth (100% +), this is a red flag that the price does not match the market and you need to negotiate the purchase price or move on to a better deal. Do not go into a car purchase upside down, this never works out well. EVER!

Character 

This is your history and your reputation as a borrower and how you have conducted previous debts and your responsibility to pay them back. This is often an “on the fence” use of judgement when all previous factors are too close to make a decision. Sometimes this will be the deciding factor so be sure you have answers to any blemishes on your past so you can reassure that it will not happen again as well as an explanation as to why they happened in the first place

Now that you know the 4 C’s you can prepare yourself financially for your vehicle purchase and be sure you are on track to match your goals and get the outcome you desire.  

Real Queens Fix Each Other’s Crowns

So visit me for purpose driven content on car buying and so much more! 

xo ~Lori 

CEO & Founder
TitleKeyCash.com + Girls Guide to Car Buying  

Become a Crazy Confident Car Buyer 

 

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