What exactly is a debt to income ratio?
02-09-2010, 04:36 AM
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I see your points, but I forgot to mention, I had over $50k in a savings account with them and it was going up and up by a few thousand a month. I understand though that the credit rating is a points based system. Everything you do is either positive or negative towards your score. Taking out a loan and paying it on time gives you extra plus points. Doing nothing doesn't add any points.
I feel like I've hijacked this thread and I'm feeling guilty for it.
I feel like I've hijacked this thread and I'm feeling guilty for it.
Level of income and assets doesn't have any bearing on the credit score. It's all about which of the many categories in the model you appear to fit into and how well that category of consumer has performed in the past in relation to debt repayment. The two things that matter most are the length of your history and whether or not you have missed any/many payments. It's also a snapshot, each score is generated as it is requested on the profile that exists at that specific point in time. It's not an organic score which necessarily grows (or can fade) over time - your score can vary wildly based on what happens to be in your report at that moment. Of course, for most your score will gradually trend over time, but that is simply a feature of your report today tending to look like it always did.
02-09-2010, 06:38 AM
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How is that possible? I mean if you are the bank and you have two clients, one with an annual income of $20,000 and the other with an income of 2 million, who would you rather lend to? Granted both have a track record of paying back on time.
02-09-2010, 07:08 AM
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If both parties have good credit scores and are paying back debts on time (as you are stating in your quesiton) then the bank would lend to both parties and probably give them both around the same interest rate... it's the amount of the loan that they would be approved for that is dependent on their income/assets/etc... not the question of whether or not they should be given a loan at all or at what rate.
02-09-2010, 07:27 AM
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A lender may very well take these additional factors into account - but your credit score absolutely does not. It is simply a numeric representation of the probability that you will default on an account.
02-10-2010, 08:59 AM
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For example 23.3% of the all US Treasury Securities are in Chiana's hands and 21.1% in Japan's. So almost half of the state's securities are held by two major players.
PS: On the same sidenote, it may also look strange that a bank charges you extra for refunding the loan before it is due.
02-10-2010, 11:26 AM
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Pre-payment penalties are usually written in fine print and can be negotiated or eliminated. I've never taken a loan with one.
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