In the scoring model for FICO, when they figure the ratio of credit to debt, do they include only the major credit cards (Visa, Master Card, Discover, etc.) or do they include the store accounts (Dillards, Kmart, Home Depot, etc.)? Also, do other loans such as mortgage, car, furniture and similar types figure into the credit to debt ratio?
Are you talking about the ratio of revolving credit (i.e. balances/total credit limit)? If so, installment loans aren't included. I don't know about department stores. Installment loans would be taken into consideration on an income/total debt ratio though
I am talking about the ratio of revolving credit (balances/total credit limit). I think this is what they look at when you are considered for a credit card. But my real question is what accounts are used to determine this ratio for FICO scoring? Everyone is saying that your ratio should be below 15%. Some of the specialty stores such as computer stores and furniture stores show it as a revolving account. If I buy $1500 in furniture, they might approve me for $5,000 in the hopes that I will buy more. It would show up on my CR as revolving, $1500 owing, $5,000 limit. So, are these accounts figured into the ratio? Are the other store accounts - Sears. Home Depot , etc factored in? Thanks.
I would imagine that they would be. I don't see why they would be treated any differently than revolving bank cards. But the credit bureaus shock the hell out of me on a regular basis, so I don't know. Anyone else know the answer to this question?
This is supposed to be the ideal situation: http://www.ftc.gov/bcp/creditscoring/present/sld008.htm breeze
Breeze: Thanks for your reply. Now I am even more confused. What is the difference between the debt ratio and the % credit card utilization? What is the debt ratio? In relation to what? Income? On the credit card utilization, does it include all credit cards (even store cards) or just the major cards (master card, visa, etc.)? And now the big question. If I use the chart, I only get a couple hundred points. There must be a starting point of 400 - 500 points that they add to or subtract from. I am guessing my score is in the 650 - 700 range. Thanks
From the rest of the presentation, I think debt ratio is total debt to limit, including installment loans. % credit card utilization is revolving accounts only, and I believe it includes all cards being reported, including retail cards. Now, I have some that aren't reported, so they wouldn't be counted. They can't do debt to income - they really don't have your income except what you've put on applications, and I don't see how they can consider it generally speaking. But an individual creditor might calculate it - but again, they only have the information you give them. As far as a starting point, I went through the entire presentation, didn't see one, but I agree, it doesn't make any sense without one. Adding up my points using EFX report and score, then taking the difference, I get 511 as a starting point. Duh....who knows. It's a game. They just gave us some game pieces to play with, not the whole set with all the rules and pieces. breeze
To calculate your debt ratio (debt-to-income), you would add up your monthly debts on loans & credit cards (not including utilities), then divide that by your gross montly income. Ideally the amount should be in the 30-40% range, but most creditors will approve up to 50%. I didn't do the chart you were talking about - but the lowest score you can have is 350 (I think), so maybe thats the starting point ??? just a guess.
bingo is 100% correct - that's your "debt to income" (or as some lenders call it, your "debt" ratio). 36% is the target there - anything over that is yellow flashing lights (i.e. best credit card may not be offered, mortgage application will require special attention). 50% is pretty much the limit. NOTE- this is based on GROSS (before taxes, deductions, etc.) income. Utilization is ALL revolving accounts (bank card, store cards, lines of credit, anything showing as REV on your report) -- add up balances, then add up limits - divide total balances by total limits, and that's your #. Most believe 35% or under is good - 15% is great, 50% is flashing yellow lights. You get screwed on Utilization if you have tradelines not reporting limits (i.e. Cap1, Citi, Amex). You also get screwed when an account that is a charge (pay in full, Diners or Amex) reports as REV. Hope that helps- mj
Has anyone had any luck getting AMEX to report credit limits? My husband and I use our Platinum AMEX Delta Skymiles card for everything (household expenses, business travel, etc). In fact, we have charged over $30K to the card since we got it in October 2000. The card usually carries a balance somewhere in the neighborhood of $4k. I've reviewed our CRs and it's obvious that this is hurting our balance/debt ratios. Please post if you've had luck getting AMEX credit limits to show up with the CRAs. Thanks.
Akg, I posted this same question the other day. Aux and Jacqui mentioned that only Equifax was reporting the correct credit limit on their reports. I am sending a letter to Equifax along with a copy of my statement with the correct credit limit. I'll see what they say and keep you posted. Dani
