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LinkedIn Debate on considering 'Character' in lending

One of the LinkedIn Groups I belong to is having a raging debate about whether that first C of Credit, ‘Character’, can be considered any more. Or should be considered again!

(BTW: Connect with me at LinkedIn. My profile is at ‘Linda Keith CPA’.)

Small Business Banking Professionals

That is the group. The discussion posed this question:

Banks are digging deeper into the character of their
borrowers. How are you or your bank addressing the “character” issue?

Bankers from around the country and from banks big and small have weighed in. The answers are all over the map, too. Here are some samples:

  • We have to get back to character lending
  • We cannot get back to character lending
  • The business bankers don’t make the underwriting decisions and the underwriters don’t know the borrower, so character as part of the equation is lost
  • Newer lenders don’t get the training or the mentoring they used to and don’t know how to take character into account
  • Character lending in any form has the potential to be discriminatory in nature
  • Character is indicated when a borrower has been through very tough times recently but continued to pay as agreed, keep on employees and support the community
  • A red flag for character is If the borrower has run up credit cards or consumer loans for toys (boats, fancy cars) without increased net worth to show for it
  • If business has been tough, finding out how they have treated their vendors, suppliers and customers might be a clue to character
  • A quality centralized underwriting team can coach front-line lenders in the questions to ask and how to document answers that will give the underwriters the ‘character’ clues they can’t get first hand
  • If the lenders compensation is based on origination volume, they might not take the character issues seriously that the underwriter won’t be able to discern

Wow, as I said, all over the board.

So how about you?

Does character still factor in? And if so, how? And how do you find out about it?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.