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A Simple Explanation Of Credit Score In Simcoe

A Simple Explanation Of Credit Score In Simcoe

If you’re planning for a Simcoe car loan at any point in the future, you may benefit from knowing how your application will be assessed. Your income and credit score plays a part, but so do the four Cs which make up a simple explanation of credit score.


That’s what our Simcoe car loan team will be tackling today. It’s not vital to learn before getting a car loan but we think it’s nice to know.


The four Cs are:


  • Character
  • Collateral
  • Credit Score
  • Capacity




Character is about how you handle debt and manage your finances rather than your sense of humour or how you handle criticism.


The lender is mainly interested in how you manage your money, how much debt you have, whether you always pay on time and how you live your life.


Quite often, questions around character remains restricted to your credit report unless you’re regarded as a borderline lending case. If the lender is unsure, they may look closer at your income, outgoings and other aspects of life.




Collateral refers to the car you’re buying. It forms part of collateral for the loan and would be what the lender would repossess.


Here the lender is more interested in the car’s value and the LTV, Loan to Value. LTV is a measure of how much of the car’s value you’re borrowing.


For example, if the car costs $30,000 and you’re borrowing $30,000, that’s 100% of the value or LTV.


If you’re borrowing $15,000 to buy that $30k car, that would be 50% LTV.


Lenders consider LTV to assess how much they would stand to lose if you defaulted on the loan. The lower the LTV, the more likely the lender will agree the loan. The higher the LTV, the more closely the lender will look at the application.


Simple Explanation Of Credit Score


Your credit score is a reflection of how you handle debt. It includes your payment history, how much debt you have, how many credit cards you have and a few other things.


Lenders look at your credit score to see what type of borrower you are. Borrow sensibly and always pay on time, you’ll have a high credit score and will be regarded as a lower risk.


If you have had credit issues in the past, you’ll likely have a lower credit score, which is a reflection of a higher perceived risk.




Capacity refers to affordability and is of prime concern to lenders. They are obligated to make sure you can comfortably afford the loan repayments. They also want you to be able to afford those repayments to minimize the risk of defaulting.


Here the lender will look at your overall debt levels, how you pay your debts, how quickly you pay off credit cards, how much disposable income you have and how much of that disposable income would be taken up by the car loan.


While this knowledge isn’t strictly necessary for applying for a car loan in Simcoe, it’s useful to know how an application is assessed and what goes into making lending decisions. At least now you have an idea of what to optimize before you apply for the loan!


If you need help or advice on anything to do with auto loans in Simcoe, contact Car Nation Canada today, we can help!


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