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Over the next five weeks we will discuss the factors that a lender analyzes when reviewing your credit. These are also called the 5 C's of credit. This week we'll look at character.

Getting a farm or real estate loan doesn’t have to be a scary, uneasy process. Knowing what a lender looks for during the application process can reduce the uneasiness.

Lenders review several credit factors when determining if an applicant is a viable credit risk. Five of those factors are often referred to as the 5 C’s. They are: character, capacity, capital, collateral and conditions. This article is the beginning of a series that will discuss all five factors. The character factor begins when an applicant makes the initial contact with a loan officer so this series will begin by discussing the importance of character.

The analysis of character uses specific performance data and a subjective analysis of the applicant. A credit report is the first tool a lender will use to analyze an applicant’s character. The credit report provides a picture of an applicant’s credit worthiness. Unreported liens, missed and late payments are items a lender does not want to see on a credit report. An occasional late payment may be acceptable but a reoccurring history of late payments does not show good character to a lender. They want to see that the applicant a history of repaying loans in a timely manner.

An applicant should annually check their credit report with one of three credit bureaus to ensure that everything is correct. Errors on a credit report can be corrected but it is a timely process so it is important to know what is on the credit report prior to applying for a loan. Applicants can check their credit report at

Lenders will also search public record documents to analyze an applicant’s character. Any type of court record will show up so this should be explained to the lender when the application is submitted. Many lenders are using sites like to research an applicant’s background.

Educational background, length of time at current residence, management ability and experience in the field play a role in determining character. Completing continuing education shows commitment to completing a project. Length of time at residence will show if the applicant moves frequently or if they try to establish themselves within a community.

Management ability is demonstrated by planning for the future through property, crop, life and health insurance, tax management, marketing and cash flow plans. Experience in the field in which you are applying for a loan is vital. An applicant applying for a loan to purchase a farm will need to show their past farming experience. For example, an individual who has grown up on a parent’s farm will be seen as having direct farming experience when they decide to purchase their own farm.

References can also play a role in character analysis. Think of a loan application as the beginning of a relationship with this lender. The references listed should be able to provide sound, solid feedback regarding both your financial and personal relationships.

Remember, character is important to your loan approval process. Prepare for your meeting with the lender by reflecting positive signs of character by a desire to establish a relationship with the lender, provide good credit history and a clean background. Find a local FCS Financial lending specialist on our locations map.

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