< Financial Dictionary

A major factor in determining creditworthiness. Capacity is assessed by weighing a borrower's earning capabilities and the likelihood of continuing income against the amount of debt the borrower carries at the time the application for credit is made. While capacity may be considered in a credit decision, the credit report does not contain information about earning ability or the likelihood of continuing income. Your debt to income ratio is the most important factor when determining your capacity. Be careful not to max out your accounts.

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