Income to Debt ratio - how crucial to credit scoring?

loopy.magic · 10 November 2009 at 7:08PM

I have a question around debt to income ratio. For the last 18 months I've worked hard to reduce my debt and also make sure I don't carry out any activity that would result in a credit search. I have total unsecured debt that equals 112% of my salary.

Part of my plan is to switch some of my debt to a consolidation loan and/or 0% balance transfer credit cards, currently I have lots of credit cards and 2 loans, but never missed/been late with a payment. Renting no mortgage.

How crucial is the income to debt ratio when it comes to credit scoring? Is my relatively large debt compared to my income going to kill my chances of successfully applying for other credit?

Numpty_Monkey · 10 November 2009 at 8:01PM

First off I would advice against a consolation loan,
switching to low intrest CC's is an option if you are desciplined enough to not spend on them, or use any of the free cards again

I don't think anyone really knows how they score things on a credit report
But a rough guess 112% debt to salery you might struggle to get anything good

loopy.magic · 11 November 2009 at 9:11AM

Is there anyone out there who has managed to get accepted for credit cards and/or loans while having a large debt similiar to mine but who also has good payment history and account management?

loopy.magic · 12 November 2009 at 9:26AM

BUMP - Anyone?

Is there anyone out there who has managed to get accepted for credit cards and/or loans while having a large debt similiar to mine but who also has good payment history and account management?

hypno06 · 12 November 2009 at 9:38AM

I think you will struggle to get good terms while your debt exceeds your annual income.

I have had over £100k of debt, always kept up to date, no defaults etc, and that would once have seen me as a good credit risk.

However, in the last two or three years, when I tried to switch debt to better providers, etc, I was unable to do so on the basis that I owed too much against my earnings, NOT on the basis of previous good repayment history.

It is only since my debt has become less than 50% of my annual salary that I have begun to get decent offers of credit again.

cb_999 · 12 November 2009 at 9:42AM

Hello Loopy, I guess the answer to your question is possibly, yes and maybe no :-). I myself have a little more total debt than my salary and was able to still get the Virgin 0% deal for example. But there is no specific formula for credit scoring. Each company has their own system. So really the answer to your question is ....... it depends on the firm your asking.

loopy.magic · 12 November 2009 at 11:47AM

Thanks for the replies, still a mystery then.

I guess I'll only find out when I actually apply for my next credit card and loan.

hax_2 · 29 November 2009 at 9:12PM

hypno06 wrote: »

I think you will struggle to get good terms while your debt exceeds your annual income.

I have had over £100k of debt, always kept up to date, no defaults etc, and that would once have seen me as a good credit risk.

However, in the last two or three years, when I tried to switch debt to better providers, etc, I was unable to do so on the basis that I owed too much against my earnings, NOT on the basis of previous good repayment history.

It is only since my debt has become less than 50% of my annual salary that I have begun to get decent offers of credit again.

hypno06 which credit cards refused you when you had a Debt to Income ratio greater than 50% and which ones accepted you when it was less than that, if you don't mind saying? It would be really useful to know. Thanks.

Income to Debt ratio - how crucial to credit scoring?

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