bookcrazychick
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Post by bookcrazychick on Jun 14, 2011 12:09:15 GMT -5
When calculating your credit score, where do they pull your income from? Tax records? Employment records?
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Deleted
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Post by Deleted on Jun 14, 2011 12:10:31 GMT -5
Income is not a factor in your credit score.
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bookcrazychick
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Post by bookcrazychick on Jun 14, 2011 12:18:14 GMT -5
Well, that is kind of what I thought. I have good credit - no late payments, no bankruptcies and have had good credit my entire adult life. However, my credit score is in the low 700's. In doing some research on the web I keep seeing that one of the credit score factors is debt to income ratio. As DH and I are self employed our income is not as simple as what is reported on a W-2. Hence, my question. We were recently turned down for an auto loan and was told it was due to our low credit score.
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Deleted
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Post by Deleted on Jun 14, 2011 12:19:56 GMT -5
Well, that is kind of what I thought. I have good credit - no late payments, no bankruptcies and have had good credit my entire adult life. However, my credit score is in the low 700's. In doing some research on the web I keep seeing that one of the credit score factors is debt to income ratio. As DH and I are self employed our income is not as simple as what is reported on a W-2. Hence, my question. We were recently turned down for an auto loan and was told it was due to our low credit score. Low 700s is not a low credit score and where did you find that one of the credit score factors is debt to income ratio? |
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bookcrazychick
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Post by bookcrazychick on Jun 14, 2011 12:25:30 GMT -5
Well, I didn't think 705 was that low either but evidently when approving us for a loan it is. I was just searching on the web and got the verbage about debt to income ratio. Maybe the finance guy at the auto place was mistaken. I am about to pull our credit reports. I haven't looked at one in about 9 months so need to ensure they are accurate.
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kgb18
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Post by kgb18 on Jun 14, 2011 12:29:24 GMT -5
Are you sure you're not confusing debt to income ratio with credit utilization ratio? That has a big impact on your score.
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bookcrazychick
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Post by bookcrazychick on Jun 14, 2011 13:12:05 GMT -5
Yea, kgb18, it must be. I believe I have figured out my problem anyway. I don't think the auto guy knew for sure he was just telling us that he was having people with scores in the 800's being denied for 0% interest which is what we wanted. We were eventually approved for a loan with interest which we didn't want. No big deal. We have just never been denied for anything before. It was a little unsettling.
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Deleted
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Post by Deleted on Jun 14, 2011 13:13:39 GMT -5
Keep in mind that even though income is not a factor in your credit score, it is a very big factor to the lender. If you cannot prove to the lender that you have enough income to be able to service the loan they will not lend you the money no matter what your score is.
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bookcrazychick
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Post by bookcrazychick on Jun 14, 2011 13:31:20 GMT -5
Keep in mind that even though income is not a factor in your credit score, it is a very big factor to the lender. If you cannot prove to the lender that you have enough income to be able to service the loan they will not lend you the money no matter what your score is. Exactly, we've always had to jump through a few extra hoops being self employed. Much easier when dealing face to face with a bank for a home loan or similar. Different when you have a dealer just throwing apps out there with no back up. It also doesn't help that we have another business we're partners with some other people. The business is the collateral for the loan but signed personally. Even though I am only liable for 25% of it the whole amount is reported on my CR. So it looks like I owe a ton of money that I couldn't possibly pay with my income. DH disputed this and 2 of the credit bureaus dropped this but one has kept it. |
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tskeeter
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Post by tskeeter on Jun 15, 2011 13:30:01 GMT -5
bookcrazy, for you to be liable for only 25% of the loan would be a little unusual. In most cases like this that I have seen, each of the parties is liable for the full amount of the loan, not just "their share". This is done so that if one of the partners doesn't pay the lender, the other partners are responsible for making up the defaulting partner's share and the lender is kept whole. If you are not absolutely sure about your liability on the business loan, I suggest that you review the loan documents to make sure that you don't have joint and several liability on the loan. (The joint and several stuff means that all of the borrowers, together are liable to pay the loan (joint), and that any one or more of the borrowers can be held responsible for the full amount of the loan (several)). Contracts are complicated. If you can't figure out the loan contract on your own, spending some money with a lawyer to explain to you whether or not you are really liable for the full amount of the loan might be worth the cost (if it looks like one of your partners is at risk of defaulting on the loan, you want to know if you need to take steps to protect yourself before it is too late). If you are liable for the full amount of the loan, you might ask the lawyer what would happen if one of your partners declared bankruptcy. A partner's bankruptcy could make the remaining partners responsible the the bankrupt partner's share of the loan.
In respect to your credit score, a score of 760 or above is generally required to qualify for the best credit terms, such as a zero interest auto loan. (Note that each lender can decide for themselves what credit score they will require to offer the best loan terms. A score of 760 is not carved in stone.)
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bookcrazychick
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Post by bookcrazychick on Jun 15, 2011 20:47:16 GMT -5
Yea, tskeeter, it is kind of an unusual loan. It was made by a small town locally owned bank where everybody involved go waaaaay back. Our attorney was very involved in the whole thing as DH would in no way take on the full burden of this loan if it came down to it. I'll just be glad when it's paid off. It does sort of make our credit report look skewed. A few years ago when we did a refi on our home, the lender was adamant in including this loan payment against our total liabilities but refused to consider the income from the business that actually made the payments. When we were about to walk away from the deal they let me send them proof that all payments had been paid by the business and none by us personally.
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