Certified Government Financial Manager (CGFM) Practice Exam 2026 – Your All-in-One Guide to Exam Success!

Character is regarded as the most important factor when evaluating creditworthiness. This principle stems from the understanding that character reflects an individual's integrity, trustworthiness, and commitment to repaying debts. Lenders assess character by evaluating a borrower's credit history, payment history, and any previous defaults. A strong character indicates that the borrower is likely to honor their financial obligations, which significantly influences the lender's decision to extend credit.

While capacity, capital, and collateral are also important elements in assessing creditworthiness, their influence relies on the assurance that the borrower has the intention and willingness to fulfill their financial duties. For instance, capacity refers to the borrower's ability to repay debts, capital involves the resources and wealth that a borrower possesses, and collateral involves the assets pledged as security for a loan. However, without the assurance provided by character, even a borrower with strong capacity or substantial capital may be viewed as a risky candidate. Thus, the emphasis on character underscores the importance of personal responsibility in the lending process.