Credit Adjudication
KNOWLEDGE EXPECTED OF: QAFP® Professionals
Highest Knowledge Level: Evaluation
Knowledge Levels and Associated Verbs
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Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
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|---|---|---|---|---|---|---|---|---|---|
|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Explain the Five C’s of credit adjudication:
- Capacity
- Credit History
- Character
- Capital
- Collateral
- Explain the purpose of the Five C’s of credit adjudication.
- Determine how each of these factors may impact capacity to repay:
- Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR)
- Stability of employment
- Stability of compensation
- Level of committed / non-discretionary expenses
- Evaluate how each of the factors may impact capacity to repay.
- Calculate Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR).
- Explain the components of a personal credit report that may impact a credit rating, such as:
- Types of credit
- Utilization of existing credit
- Length of credit history
- Repayment history
- Frequency of borrowing
- Number of inquiries
- Types of inquiries (hard or soft inquiries)
- Record of collection, bankruptcy or orders for payment
- Comments related to fraud or identity verification alerts
- Credit score
- Evaluate how each of the components of a personal credit report may impact a credit rating.
- Determine how each of these factors may impact the assessment of a prospective borrower’s character:
- Stability of employment
- Stability of residency
- Ability to manage money
- History of debt repayment
- Accumulated savings
- Evaluate how each of the factors may impact the assessment of a prospective borrower’s character.
- Determine how each of these factors may impact the assessment of a prospective borrower’s capital:
- Value of assets
- Value of liabilities
- Liquidity of assets
- Priority of debts
- Ownership structure of assets
- Volatility of asset values
- Geographic location of assets
- Evaluate how each of the factors may impact the assessment of a prospective borrower’s capital.
- Calculate loan-to-value (LTV).
- Explain types of collateral / guarantees, such as:
- Cash or cash equivalents
- Principal residence
- Non-registered investment assets
- TFSA assets
- Other real personal property
- Tangible business assets
- Intangible business assets
- Personal property
- Life insurance
- Co-signatory
- Guarantor
- Determine how each of these factors may impact collateral:
- Value of collateral
- Liquidity of collateral
- Volatility of collateral
- Encumbrances against collateral
- Geographic location of collateral
- Environmental impact of collateral
- Evaluate how each of the factors may impact collateral.
- Explain the impact of the Five Cs of credit on the outcome of a credit adjudication.
- Credit Approval
- Structure of debt (installment vs. revolving, secured vs. unsecured)
- Security requirement
- Repayment structure
- Interest rate
- Fees
- Credit limit
- Term
- Amortization
- Explain other conditions that may impact a lender in the adjudication process for credit, such as:
- Business cycle
- Risk appetite of the lender
KNOWLEDGE EXPECTED OF: CFP® Professionals
Highest Knowledge Level: Evaluation
Knowledge Levels and Associated Verbs
|
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
||||||
|---|---|---|---|---|---|---|---|---|---|
|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Explain the Five C’s of credit adjudication:
- Capacity
- Credit History
- Character
- Capital
- Collateral
- Explain the purpose of the Five C’s of credit adjudication.
- Determine how each of these factors may impact capacity to repay:
- Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR)
- Stability of employment
- Stability of compensation
- Level of committed / non-discretionary expenses
- Evaluate how each of the factors may impact capacity to repay.
- Calculate Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR).
- Determine the components of a personal credit report that may impact a credit rating, such as:
- Types of credit
- Utilization of existing credit
- Length of credit history
- Repayment history
- Frequency of borrowing
- Number of inquiries
- Types of inquiries (hard or soft inquiries)
- Record of collection, bankruptcy or orders for payment
- Comments related to fraud or identity verification alerts
- Credit score
- Evaluate how each of the components of a personal credit report may impact a credit rating.
- Determine how each of these factors may impact the assessment of a prospective borrower’s character:
- Stability of employment
- Stability of residency
- Ability to manage money
- History of debt repayment
- Accumulated savings
- Evaluate how each of the factors may impact the assessment of a prospective borrower’s character.
- Determine how each of these factors may impact the assessment of a prospective borrower’s capital:
- Value of assets
- Value of liabilities
- Liquidity of assets
- Priority of debts
- Ownership structure of assets
- Volatility of asset values
- Geographic location of assets
- Evaluate how each of the factors may impact the assessment of a prospective borrower’s capital.
- Calculate loan-to-value (LTV).
- Explain types of collateral / guarantees, such as:
- Cash or cash equivalents
- Principal residence
- Non-registered investment assets
- TFSA assets
- Other real personal property
- Tangible business assets
- Intangible business assets
- Personal property
- Life insurance
- Co-signatory
- Guarantor
- Determine how each of these factors may impact collateral:
- Value of collateral
- Liquidity of collateral
- Volatility of collateral
- Encumbrances against collateral
- Geographic location of collateral
- Environmental impact of collateral
- Evaluate how each of the factors may impact collateral.
- Explain the impact of the Five Cs of credit on the outcome of a credit adjudication.
- Credit Approval
- Structure of debt (installment vs. revolving, secured vs. unsecured)
- Security requirement
- Repayment structure
- Interest rate
- Fees
- Credit limit
- Term
- Amortization
- Explain other conditions that may impact a lender in the adjudication process for credit, such as:
- Business cycle
- Risk appetite of the lender