What are the 3 C's of credit?

The three C's of credit—Character, Capital, and Capacity—are fundamental principles used by lenders to evaluate a borrower's ability to repay a loan.

Character refers to the borrower's creditworthiness, which is often assessed through their credit history and reputation in managing financial obligations. This aspect reflects the borrower's reliability and trustworthiness, making it a critical factor in lending decisions.

Capital describes the borrower's financial resources, including savings, investments, and assets. It indicates the amount of money the borrower has available to put toward a purchase or an investment, showing the lender that the borrower has personal financial resources that can supplement the loan.

Capacity is the borrower's ability to repay the loan based on their income, employment stability, and existing debt obligations. This assessment considers whether the borrower generates enough income to cover the loan payments comfortably, which indicates their financial stability and future prospects for repaying borrowed funds.

The other options, while they may incorporate some relevant terms, do not accurately reflect the essential components of credit assessment recognized in financial literacy.