It's dependant on the lender. Some, like cap1 won't bat an eye if you max out your cards. Others, like chase, have an itchy trigger finger. There is no one size fits all answer.
@Brian_Earl_Spilner wrote:It's dependant on the lender. Some, like cap1 won't bat an eye if you max out your cards. Others, like chase, have an itchy trigger finger. There is no one size fits all answer.
Agreed, and even within lenders there is no one-size-fits-all answer. I'm thinking someone making a half-million a year with a 50% DTI wouldn't phase most lenders; someone making 10% of that with the same 50% DTI may well not qualify for credit.
@Anonymous wrote:But say you make 10k a month 120k a year but say you have 120k in credit card debt, minimum payments usually come out to 2% of the balance so roughly 2.5k per month or 25% DTI. You think as a lender this would be acceptable in granting more credit or this is getting out of hand?
When you postulate "you make 10K a month", is that gross or net? I ask because while I "make" more than that in gross pay, my net after taxes, health care, HSA, and 401K contributions is a little over half that amount. Assuming I owed $2,500 per month in minimum payments on just my credit cards, that would be a HUGE burden in addition to normal monthly spending for things like rent, utilities, subscriptions, groceries, automotive related expenses, clothing..., you get the idea, and so too do financial institutions. So yes, I believe most lenders would consider that much debt in relation to a gross income (which is typically what most lenders ask for on credit card applications), and as such, "getting out of hand".
Then there is the red flag of someone making only minimum payments, this is what I think the new FICO 10 and 10T scoring models are targeting, it is one thing to have a lot of debt, but another thing entirely when the DTI is very high (and either staying steady or climbing), and only minimum payments are being made.
Montly payments vs. montly income isn't the only DTI calculation lenders look at, as well. When I did lending at a small CU, we also had to look at unsecured DTI, which was total outstanding unsecured debt vs. annual income, and that ratio had its own %'s that it had to meet.
