Does a car loan figure into the equation for balances/credit limit (I don't know the proper term)? Ex. With my car loan included my ratio would be 48%. Without the car loan it's 16%, which is much better than with the car loan.
The car loan, and any monthly recurring debt such as credit crad payments are used to calculate your debt to income ration. Typically lenders want the housing to gross income ratios to be less than 30% and the housing plus recurring monthly debt to be less than 40%. You can calculate your ratios by taking the total monthly housing payment (payment + monthly taxes and insurance referred to as the P.I.T.I.) divided by your gross monthly income (before taxes) to find your housing ratio. For the debt ratio take the P.I.T.I. + monthly recurring debts (installment loans and minimum credit card payments) divided by your gross monthly income to figure your debt ratio. If you are 40% or higher on the debt end you will have problems. Be sure to include any other income like child support, SSI, or any other payments that will continue for more than three years when figuring your income.
Really talking about FICO scor Thanks. That's good information. I wasn't really clear with my question though. I'm more interested in how my debt vs. credit limit affects my FICO scores.
RE: Really talking about FICO Basically the same applies. Your FICO score will be determined by debt vs. income plus the amount of inquiries and available credit. When going for a mortgage it is best to have your debts low and not show a lot of available credit like cards that have zero balance but a $5,000 limit. Hope this answers your question a little better. As everyone knows....the FICO score is more elusive than "Bigfoot".
RE: Really talking about FICO Thanks. My loan officer told me that I should have about 30% balances on each of my cards. He claims that he will be able to get me a mortgage with a FICO of 580. My scores were 544 (FICO), 537 (Empirica) and 553 (Beacon). That was at the beginning of March. Since then I've satisfied two state tax liens, gotten 3 derogatory lines items removed, and had accurate information reported for collection accounts that I have paid. I don't know how hard it is to get 36 points, but it seems like a struggle. I don't know what else I can do to improve my score other than pay down my 2 cc's to 30% of availability. Any thoughts? Does 36 point improvement seem attainable before August (my expected closing date)?
RE: Really talking about FICO Hi Kim, I am really nervous about my credit. I have about 8 good lines of credit, but 4 paid collection accounts. I am buying a house with my fiance(who has perfect credit) we make plenty of money, but I am worried that I will be the reason we cant get a house. Based on your situation, were lenders willing to talk to you with not so great credit? Any advice would be greatly appreciated Cathy
RE: Really talking about FICO One lender, SunTrust, flat out told me that they wouldn't be able to do anything for me, regardless of how many bills I paid off. Homebanc, who i'm using now, is confident that I'll be able to close on my home in August. It may just depend on where you live. I'm in Atlanta and the housing market is crazy here. Almost anybody can get a house, even if they really can't afford the payments. There have been a lot of foreclosures on brand new homes because people are getting loans and they really can't afford the house.
RE: Really talking about FICO After the steps you have taken, have your loan officer tell you what your scores are now.
RE: Really talking about FICO Cathy If your collections are paid and your debt/income ratio is good, combine that with your fiancee's good credit and you guys shouldn't have a problem. Mortgages are different when looking at collections, its very important that if you have any that they are PAID. You guys should get preapproved before you really start looking. Check the fool.com and mortgage101.com for information. Regards, JP
RE: Really talking about FICO Kim wrote: ------------------------------- It may just depend on where you live. I'm in Atlanta and the housing market is crazy here. Almost anybody can get a house, even if they really can't afford the payments. There have been a lot of foreclosures on brand new homes because people are getting loans and they really can't afford the house. That sounds really responsible on the part of the mortgage lenders. I hope they aren't shipping those loads upstream to FreddieMac and FannieMae, or their fannies will likely be in a federal penetentiary. This is the same kind of thing that the credit card industry did a couple of years ago. They gave credit cards to almost everyone without regard to the person's credit history and income and then were whining and complaining about the delinquency rate and charge-off rate. Then they had the nerve to start pushing for bankruptucy reform because people were 'abusing' it. Well guys, you are the ones that created the problem by giving out all of the those gold and platinum cards to people with marginal histories or ability to pay.
RE: Really talking about FICO Most CRAs don't have any idea what your income is, so calculating a score using that as a factor is somewhat dubious. Someone with $25000 in debt might be in big trouble if they only make $30000 a year, or could be just fine if they make $200,000.
