Overall Debt vs Util

[EaglesFan2006]

Does overall credit card debt come into play a lot with lenders and credit scoring, or is it really only relevent to your overall util?  I'm sure it's a factor to some degree, but I'm not sure how much, and if the util ratio far outweighs it.

On a related note, do you think it's worthwhile to report changes in increased income to your existing creditors?  Or would they really care?

[coldnmn]

Utilization plays a factor on individual as well as overall utilization. It becomes a red flag when even one card goes over 60% even if the rest are zero. This can be explained to a reconsideration as a zero interest or some other factor. On a lot of cards you can change income on your account page. The wage increase will play a factor on future CLI so yes update it.

[EaglesFan2006]

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@coldnmn wrote:

Utilization plays a factor on individual as well as overall utilization. It becomes a red flag when even one card goes over 60% even if the rest are zero. This can be explained to a reconsideration as a zero interest or some other factor. On a lot of cards you can change income on your account page. The wage increase will play a factor on future CLI so yes update it.

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Thanks...I understand how important util is.  I'm just curious is the actual dollar amount of debt is as important or important at all in the grand scheme of things.

[too-much-time]

Credit limits do not pay the bills; income obviously does. Absolute credit card debt therefore matters more than utilization does. None of this should come as a surprise, and yet credit limits and utilization are discussed far more often. Maybe it's just because we have less room to increase our salary, I don't know. I think TU is toughest on absolute debt, whereas EX gives somewhat higher weight to utilization. Higher than TU, not higher than absolute debt! EQ is inbetween. Maybe.

[coldnmn]

+1

[EaglesFan2006]

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@coldnmn wrote:

+1

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Makes sense...so then how does a credit report measure "absolute debt" when it has no income information?

[Anonymous]

I would look at DTI ratios for this.

A DTI figure is typically calculated by adding together mortgage/rent and minimum monthly debt payments, and dividing by monthly income.

[too-much-time]

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@EaglesFan2006 wrote:
Makes sense...so then how does a credit report measure "absolute debt" when it has no income information?

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In dollars! If you compare debt to anything such as income, then it becomes relative. So the answer is that absolute is simply absolute. But some comparison is needed to maintain contact to earth, and that's where the relative utilization comes in. I would also imagine that the FICO formulas take into consideration that lenders know the salary of their customers and hand out credit limits accordingly. Lastly, there are exceptions of course. There are times when a change in utilization can move the score considerably, and there are times when having $10,000 in credit card debt may not affect it much. Probably depends heavily on the rest of the picture.

[EaglesFan2006]

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@too-much-time wrote:

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@EaglesFan2006 wrote:
Makes sense...so then how does a credit report measure "absolute debt" when it has no income information?

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In dollars! If you compare debt to anything such as income, then it becomes relative. So the answer is that absolute is simply absolute. But some comparison is needed to maintain contact to earth, and that's where the relative utilization comes in. I would also imagine that the FICO formulas take into consideration that lenders know the salary of their customers and hand out credit limits accordingly. Lastly, there are exceptions of course. There are times when a change in utilization can move the score considerably, and there are times when having $10,000 in credit card debt may not affect it much. Probably depends heavily on the rest of the picture.

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I posted this in the relationships and money forum, but it fits better here I suppose.  Since my DW's credit is shaky, the bulk of our debt typically falls under my name...that includes CC debt and our auto loan (her auto loan is PIF).  So with the holidays around the corner, I'm sure there will be a brief spike in total debt.  Of course, both of our incomes go into paying that back and should be counted in DTI.  I'm wondering if creditors ever think of that.  After al, I'm sure we aren't the only couple that has the majority of cards in one name.  Any thoughts, or am I just overthinking this for no reason?  I'm only focused on my current accounts, not any new ones.