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By Harriet Goode
Editor's Note: Here is one in i series of releases on consumer education by Don Long Df the agricultural economics iepartment of Va. Polytechnic Institute.)
Credit is a wonderful thing when used wisely and troublesome thing when used pooriy. It enables people to make better use of their limited capital. It also may paralyze people money-wise. Credit itself is only an economic tool. In itself it is neither good nor bad. In ltslef, it does nothing for nor to people. It is people and the use they make of credit that make it what it is. Consumer credit is based largely upon trust. There are agreements, contracts, credit bureaus, collection agencies, etc.; but basically a credit system would be very difficult to devise and operate without a high degree of trust. This is trust by the lender in us as borrowers, trust by us in the lender as a reputable, ethical' businessman. This trust, in turn, is built on a foundation of three “C’s” are character, capacity, and capital.
The first “C“ mentioned, character, of course involves us. Involved are such things as honesty, integrity and willingness. Capacity, the second *C", is also based largely on us. Here a lender looks at uswhat we do, how well we do it, and how well we’ll probably do it in the future. From thi^ he estimates our capacity or ability to repay a loan. If the capacity is there we get a loan; if not, we don’t. The importance of capital can be summed up by saying “It takes nioney to borrow money* This isn’t completely true.* Character and capacity may help offset a lack of capital. Yet, it*8 also true that, if you already have capital, it probably will be easier to borrow mOre.
Credit-based on character, capacity, and capital is akey-^ stone in oyr economic life.', Handled wisely and carefully, it is a terrific tool for good living. Handled poorly, however, it may become a tail that wags the dog, a real millstone around our necks. So, it pays to look at the three “C’s" as a lender would, and borrow accordingly.
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