May 28, 2023

5C Credit Giving Principles and How to Get Your Credit Accepted – One of the financial products, namely the provision of credit, is already familiar to the public, where many people apply for it according to their needs. Of course, it’s not new when a credit request is submitted, then a financial institution immediately approves and provides a loan.

There are various concepts that become principles in the granting of credit, known as the 5C and 7P principles. These principles will then become a reference and material for consideration by financial institutions in approving credit requests from customers.

5C Credit Provision Principles

The 5C principle is the first to be used as a reference in granting credit to customers, this principle consists of five criteria that must be met by credit applicants, namely:

The first criterion is character, which looks at the character and background of the prospective borrower or customer applying for credit. This character is seen from interviews conducted by the bank, usually the customer service department. From this character, one can also see the reputation of the prospective borrower, whether they have a criminal record or bad financial habits, such as not paying off loans.

Capability is how the borrower’s ability to pay off his credit. This criterion is seen from how the customer runs his business or how much income he receives each month. If the bank suspects that the customer does not have the ability to pay credit, then it is very likely that the credit application will be rejected.

Capital or capital owned by prospective borrowers, especially those that apply to customers who borrow for their business or business. By knowing the capital or assets owned by the customer’s business, the bank can obtain the source of financing that is owned. In addition, the bank can also see how the financial reports of the businesses run by customers are then used as a reference whether credit is appropriate or not.

Collateral or guarantee given to prospective borrowers when applying for credit from the bank. As the name implies, this guarantee will be a guarantor or protector for the bank if later the customer cannot repay the loan taken. Therefore, optimally, the amount of collateral that is physical or non-physical is greater than the amount of credit given.

Condition is an economic condition that is general or specific in the business sector carried out by the customer. If the economic conditions are not good or the customer’s business sector is not promising, banks will usually reconsider giving credit. This is related again to how the customer’s ability to repay the loan later is of course affected by economic conditions.

To Have Credit Received By 5C Principles

So that your credit applications can be approved based on the 5C principles? There are many cases where someone wants to have their own credit card, but the application submitted has not been approved by the issuing bank. Even though they feel they have fulfilled all the existing requirements, the desired loan has not been obtained. This confuses us about what causes the bank to reject our credit application.

From the 5C principles above, in choosing all incoming credit applications, there are several things that the bank considers in passing your application. In addition to the completeness of the documents, credit risk is another thing to consider.

What is credit risk? Credit risk is the risk that must be borne by the issuing bank if the debtor is unable to pay the arrears that are due. This risk is measured from several aspects, such as the ability to pay (usually measured by income, work history, etc.) and the character of the cardholder. The following is a benchmark for banks in approving credit applications that you need to know.

  • Meet the Basic Requirements Listed in the Application

In submitting a credit application, there are several basic requirements that you must meet, such as a minimum age limit and income per month. If you do not meet these two basic requirements, of course the application submitted will not be accepted.

  • Complete the Required Data and Documents

In filling out the application form, make sure the data you enter is correct, and the handwriting on the form can be read clearly. In addition, don’t forget to ensure the completeness of the required supporting documents. Some of the requirements needed in applying for a credit card have been previously described in the product FAQ on this site.

  • Find a Bank Close to Domicile

Not all areas are the reach of the bank that you might choose. In addition, banks will be very selective about applications submitted by potential customers who are domiciled outside the reach of their business area. Therefore, try to get you to apply for a credit card at the issuing bank according to your domicile.

  • Work and Income Must Be Consistent

The use of credit intended for the long term makes the income stability of prospective customers one of the important benchmarks for banks to ensure that bills can always be paid on time. People with consistent jobs are considered to have lower credit risk. Therefore, try not to change jobs too often if you plan to apply for a credit card in the near future.

  • Nominal Income Is “Safe”

In addition to consistency and stability of income, the amount of income must also meet the expenditure profile of the prospective debtor. Because the use of credit is generally for consumption needs, good control of use will be needed to prevent usage that far exceeds the ability to pay. Therefore, the nominal income that is able to cover the value of consumption is used as a benchmark for banks in accepting your application.

  • Have a Good Credit History

Another form that becomes the decision of the issuing bank is your credit history, especially if the prospective customer already has a credit card or has applied for a loan from a bank before. The bank will check the credit records listed at Bank Indonesia, as well as assess your credit condition (in this case including other loan expenses you have). If you already have many loans or credit cards, the bank will consider you to have a high credit risk and will most likely refuse the credit you apply for.

  • Give Correct Verification Information

There will always be a stage where the bank verifies the data that you provide in the application form. Proof is usually by telephone to the numbers requested in the application form. Therefore, always make sure the contact numbers you provide are correct and can be contacted by the bank at any time for the loan verification process.

5C conditions

According to Law no. 7 of 1992, what is meant by credit is the provision of money or bills based on a loan agreement or agreement between the bank and another party that requires the borrower to pay off the loan according to a specified time period with interest, compensation, or profit sharing. The following are the conditions contained in the 5C Credit Terms, including:

  • Character is the nature, character, hobbies and habits of the debtor which is one of the conditions that must be considered in granting credit. Creditors must always be selective in choosing the character of prospective debtors, offering loans to debtors who tend to lie, break promises, and have bad habits, such as gambling, living extravagantly, and so on. In other words, creditors must choose potential creditors. who behaves well, always keeps promises, and always tries to fulfill his obligations. In essence, you must choose a prospective borrower who has a good reputation in the community.
  • Capacity, i.e. the creditor must pay attention to the capacity requirements (ability) of the prospective debtor. Does he have the ability to repay the loan or not.
  • Collateral Collateral (collateral) owned by the prospective debtor is a credit requirement that is no less important and must be considered before giving credit. Guarantees (Collateral) are very useful in case the debtor is unable to return the loan on time.
  • Capital, Capital (capital) owned by the debtor is a credit requirement that must be considered, especially the amount of capital owned and the allocation of the use of that capital.
  • Condition of Economy, the situation and economic conditions surrounding where the prospective borrower resides is the fifth credit requirement that must be considered in granting credit. Creditors must pay attention to the surrounding economic conditions at the time of granting credit and possible economic conditions that will occur in the future.

Good Relations With Banks

To carry out good cooperation, it must be based on trust, so as a guideline in banking transactions, attention must be paid to the 5C Principle above. If you haven’t met some of them, maybe that’s the reason why your application submission has not been approved until now. Study and avoid things that might cause your application to be rejected, so that your next application will be accepted.

So a little discussion about the 5C Credit Giving Principles and How to Get Your Credit Accepted, I hope that this discussion can add insight and knowledge to all of us, and we thank you for listening to our review. If you find our review useful, please share it 🙂

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