Did you know that when you apply for a loan or any type of credit approval, most lenders use the 5 Cs to decide whether they’re going to give you credit or a loan? They’ll look at things like your credit scores, credit report, proof of income. The factors they look for when they review all of your information are character, capital, collateral, capacity, and conditions. Here’s what each one means.

1. Character

Character includes things like your credit history (basically your track record for repaying loans or debts). It’s in your credit reports from Experian, Equifax, and TransUnion. These reports also log any bankruptcies or times any of your accounts have ended up in collections, and most of that information is part of your credit report for 7 to 10 years.

2. Capital

Capital basically comes down to how much money you put toward the purchase, like a downpayment on a mortgage. Lenders like to see that you have skin in the game; the more money you put down, the more invested you are, and that generally makes them feel that you’re less likely to default on the loan. It’s a big plus for your chances of credit approval.

3. Collateral

Collateral is anything that can be used to secure a loan. It’s possible to put up property or other assets (like investment holdings), but usually the thing you’re taking out the loan for is the collateral. For example, when you get a home or car loan, the bank can simply repossess the house or the car if you default—which lessens the risk for them.

4. Capacity

Capacity is how likely you are to be able to repay the loan. Your income is a factor, and so is your debt-to-income ratio. That’s because the lender wants to know that you have enough money to make the payments on any loan they extend to you, so they have to take into account all of the other financial obligations you have.

5. Conditions

Conditions are things like the amount of time you’ve been with your employer, and the stability of the industry you work in. They want to assess whether you’re likely to become unemployed anytime soon. Additionally, they might consider market conditions—if the economy is weakening, or the industry you work in is facing a major legislative change that could affect your employment, that could affect your chance of credit approval.