What Are Credit Criteria?

Credit Criteria Explained in Less Than 5 Minutes

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Credit criteria are several factors, such as your payment history, income, and overall financial situation. Lenders look at your credit criteria when you apply for a loan or line of credit so they can assess what type of credit risk you pose as a borrower.

Definition and Examples of Credit Criteria

Credit criteria are what lenders use to assess your creditworthiness, or how likely you are to pay back money that you borrow. You may also find your creditworthiness is taken into account when you try to rent an apartment or shop for a lower insurance rate. While lenders can look at factors ranging from your repayment history to how much income you bring home, most take a good hard look at the “5 C’s of Credit.” This is a common term used by financial institutions, so you’ll often hear credit criteria referred to as such.

  • Alternate name: 5 C’s of Credit

The 5 C’s of Credit are broken down as follows:

  1. Credit history
  2. Capacity
  3. Collateral (if you apply for a secured loan)
  4. Capital
  5. Conditions

Many lenders will also look at your credit score as a sign of your creditworthiness. Credit companies take information from your credit report to form your credit score, such as your payment history, outstanding balances, applications for new credit, the length of your credit history, and the types of credit accounts you already have open.

How Does Credit Criteria Work?

It’s important to understand what your credit report is, as many lenders review your report when checking to see if you meet their credit criteria standards.


A credit report houses important information about your financial life, such as any current debt you have, your bill payment history, and personal information such as where you live and work.

Your credit report even contains information regarding whether you've been sued, arrested, or filed for bankruptcy in the past. Lenders use credit reports to help decide if they should give you credit and if so, what interest rate they should charge you. Employers, landlords, and insurers may also review your credit report.

Let’s expand on those major factors that make up credit criteria and how to ensure that you’re meeting the standards necessary to be deemed a responsible borrower.

Payment History

Your payment history looks at whether or not you’ve made on-time payments to past and current credit accounts. If you miss a payment, have a credit account sent to collections, or file for bankruptcy, your credit score can suffer as a result.

Credit Usage

How much of your current available credit you’re using is a major element of credit criteria that can impact your credit score. Your utilization ratio compares the amount of credit you have used to the amount you have overall. The less of your available credit you use, the better.

Credit History

How long you’ve had your oldest and newest credit accounts, alongside the average age of all of your credit accounts, are also taken into account by creditors. Having a longer credit history, and illustrating good credit habits during that time, can work well in your favor.

Your overall credit history looks at a lot of the factors outlined in this article and gives a snapshot of how you’ve managed credit over the years. Your credit report is essentially a detailed ledger of your credit history.

Credit Mix

The types of credit accounts you have open (aka, your credit mix) can give a lender confidence that you can manage multiple types of credit accounts at once.


Whether or not you can afford your payments is a key type of credit criteria lenders will look at. They may take your income and employment history into account when considering if you will be able to pay your outstanding debt while balancing your living expenses.


If you apply for a secured credit product, like an auto loan, you will need to provide collateral to back the loan. The value of the collateral you provide will play a big factor in the lending decision for a secured credit product.


If you fail to repay a secured loan, the lender can seize your collateral to recoup their losses.


Even though your household income is what you’re supposed to pull from to repay your loan, lenders look at your current capital (savings, investments, assets, etc.). They do this to determine if you’ll be able to pay back your loan in the event that you lose your job or experience a financial setback.


Depending on the type of loan, a lender may inquire as to how the borrower plans to use the loan and take that answer into consideration. The lender may also consider other conditions, such as environmental and economic factors that might influence the outcome of the venture.

Key Takeaways

  • Lenders consider your credit criteria so they can assess how much of a credit risk you pose.
  • Credit criteria are made up of multiple factors such as a borrower’s payment history and income.
  • Companies can review a lot of your credit criteria by looking at your credit report.
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Wells Fargo. "Know What Lenders Look For." Accessed Oct. 1, 2021.

  2. USA.gov. "Credit Reports and Scores." Accessed Oct. 1, 2021.

  3. Consumer Financial Protection Bureau. "Credit Score Myths That Might Be Holding You Back From Improving Your Credit." Accessed Oct. 1, 2021.

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