Whether you're buying your first home, refinancing a rental, buying a commercial building, funding a development or growing a business, every lender weighs up the same five things: the five Cs of credit. They're the foundation of any lending decision. What changes from one loan to the next is how each C is measured.
The foundation of every loan
Five things every lender weighs up
What are you borrowing for?
Then tap each C to see what lenders look at and what helps.
1 of 5
Character Will you repay?
Your track record: how you've handled credit before, your credit file, your experience and how open you are in your application.
For a home loan
Your credit file, how you've managed past loans and cards, and steady employment.
For commercial property
Your history as an owner or investor, how you've run past facilities, and the tenants you choose.
For a development
Your team's track record: projects you've completed, your builder and project manager, and how past projects went.
For a business loan
How long you've traded, your industry experience, your tax record, and how you've run your business accounts.
What helps
- Check your credit file before you apply and correct any errors
- Explain any past problems up front, and what's changed since
- For projects and businesses, show your experience and your team
2 of 5
Capacity Can you afford it?
Whether your income or cash flow covers the repayments, tested at a higher rate than today's, with room to spare.
For a home loan
Your income against living costs and other debts, tested at a higher rate, within debt-to-income limits.
For commercial property
Interest cover: whether the rent or the business's earnings cover the interest, with a buffer.
For a development
Whether sales, or refinancing at completion, repay the loan and the interest that builds up during construction.
For a business loan
Whether the business's cash flow and profit cover the repayments, from your accounts and forecasts.
What helps
- Reduce or close credit card limits you don't use
- Have recent payslips, accounts or rental figures ready
- Run the numbers first with our calculators
3 of 5
Capital What have you put in?
Your own stake: the deposit, equity or money you've put in. The more you have in, the less the lender has at risk.
For a home loan
Your deposit: usually 20% for a home to live in and 30% for a rental, less for new builds or with a First Home Loan.
For commercial property
Your deposit or existing equity. Commercial lenders usually want more of your own money in than for a home.
For a development
The equity you bring to the project, such as land you own or cash, alongside any pre-sales.
For a business loan
What the owners have invested and the profits kept in the business.
What helps
- Show where your money is coming from: savings, equity, KiwiSaver or a gift
- Keep money in the business or project where you can
- Ask about family help or a guarantee
4 of 5
Collateral What secures it?
The security the lender can rely on if things go wrong, usually property, valued independently.
For a home loan
The home you're buying, valued by the lender, and sometimes a family guarantee.
For commercial property
The building, its valuation, the lease terms and how easily it could be re-let or sold.
For a development
The land and the finished project's value, often from an 'as if complete' valuation.
For a business loan
Business assets, equipment or property, and often personal guarantees from the owners.
What helps
- Get a registered valuation when the lender asks for one
- Know exactly what you're guaranteeing before you sign
- Keep the property well maintained and insured
5 of 5
Conditions What's it for?
The purpose of the loan and its terms, and the wider picture: the property or business sector, the economy and lending rules.
For a home loan
Buying, building or refinancing, the property type and location, and current rules such as deposit and debt-to-income limits.
For commercial property
The tenant's strength and lease length, the property type, and the local market.
For a development
Consents, the build contract, pre-sales and the market for the finished homes.
For a business loan
Your industry's outlook, what the money will do, and the wider economy.
What helps
- Explain clearly what the money is for
- For projects, line up consents and pre-sales early
- Choose a loan structure that suits the purpose
Your quick check
Rate each C to see where your application looks strong and what to work on first. Your answers stay on this page unless you ask us to call.
No application is perfect on every C, and it doesn't need to be. A strength in one can balance a weaker one: a bigger deposit can make up for a shorter track record, and strong cash flow can support a smaller security. Lenders also weigh the Cs differently, which is why the same application can get different answers from different lenders. Knowing which lender suits your mix is a big part of what an adviser does.