The CRAs do not supply income information to lenders, so DTI would never be listed. Lenders calculate your DTI using the information on your credit report and the income information you have supplied them.
The formula is total of all monthly payments / (annual income/12)
For example, let's take someone with a $100,000 annual income who has a $2000 mortgage, $500 auto loan, and three revolving credit cards showing a minimum monthly payment of $35 each.
2605.00 / 8333.33 = 31.26% DTI
What if you use your credit cards to meet a minimum spend on a new card, or just charge to put usage on an existing card? For example if you charge 2 Louis Vuitton bags and pay them off in full before the statement cuts. Is that sort of thing calculated in DTI?
@grower1, your bag purchase wouldn't affect DTI. When DTI is calculated, minimum credit card payments are used. Because there's no debt, there's no minimum payment.
Thank you @HeavenOhio!
I always wondered how it worked and how DTI would be calculated if I ever applied for a loan.
I've never had any loans (car/morgage/personal). I do have about 10 cards, AZEO so I let a small amount report on one. I have about 52k in revolving credit lines + Amex Gold 30k POT.
I don't pay any utilities. I'm on my lease, for monthly rent ($2,500) but I don't really pay that either, although I have in the past to meet spend requirements. My spouse pays for car payments, insurance, groceries etc.. Maybe my DTI is zero or really low.
Your credit report is never used as the source for calculation of a debt to income ratio.
Income is not in your credit file, and debt only includes those creditors or businesses that have voluntarily chosen to report their account to the CRAs.
Credit reporting/scoring uses similar ratios, but they are not debt to income ratios.
Scoring of revolving debt uses the ratio of current balance divided by credit limit, and installment debt calculates the ratio of current balance divided by initial loan amount. Those ratios are sometimes incorrectly referred to as DTI, but they dont include either all debts of current income.
If a given creditor is using debt to income ratio as an approval or evaluation factor, such as it common with high principal amounts of credit, such as mortgages, the creditor will request disclosure from the consumer, usually in the form of a signed statement.
Thanks for the info about Exp, I have a account with them but had to log in on desktop to see the dti chart. With my income it says I'm at 11%
Be aware, I just went to check mine with my Experian account. I have 1 credit card reporting a balance, and 1 car payment. My total monthly debt should be no more than $450. Experian is saying $704. I went through and looked at all my open accounts one at a time. It's showing monthly payments on accounts that haven't carried a balance or even seen a charge in almost a year.