Factors that Affect Credit Score

Yvette, a loan officer, examines Omar's tax returns, current employment, debts, and assets to determine his financial ability to pay back a bank loan. Yvette subsequently recommends Omar's loan be approved because he has the ____ to make the loan payments.

• character

• collateral

• capital

• capacity

Sanjay has his eye on a new sports car and plans to put down $10,000 cash toward the total purchase price of the vehicle. This cash amount is referred to as:

• Cash flow

• Collateral

• Conditions

• Capital

Which of the following scenarios illustrates a situation in which a lender quantifies a borrower's character to determine creditworthiness?

• Main Street Bank will approve Leticia's loan application because of her good reputation in the local community

• Quickie Loans will make a loan to Theo based on his $40,000 down payment

• XYZ Finance will not approve Mark's loan application based on town gossip about him

• J&B Finance will not make a loan to Christa due to late payments and a large debt load on her credit report

When it comes to loans, the specific factors surrounding the loan, such as the principal amount, interest rate, term, and current state of the economy are referred to as ____.

• collateral

• cash flow

• capital

• conditions

Gertie and Nate are planning to open a small landscaping company. They intend to use the equity in their home to secure a business loan from the bank. Their home is an example of:

• Character

• Collateral

• Capital

• Capacity