Some people see a utilization ratio of their installment loans when they check their credit report. If you see a utilization ratio of your student loans or of your auto loans, for example, do not be surprised that it's close to 100% or over 100%. For many student loans, expect to see amount owed greater than the credit limit listed as well, making it seem that you have gone over your allowed limit.
Do not worry. Student loans and auto loans are installment loans and, therefore, even though a report might show the same type of features that it does for credit card, it is not counted the same. The credit scoring agencies are able to tell the difference between revolving accounts (credit cards) and installment loans and know that if you just took out a loan of $10,000 for your car, then your utilization will be 100% on the first payment as the balance and credit limit will both be $10,000. If you have student loans with capitalized interest, it will say that your credit limit is i.e. $10,000, yet the balance is $14,000 because you have so far run up a total of $4,000 in interest costs.
Credit scoring agencies know and understand the difference and the only utilization ratio and credit limit that you need to worry about is that of your revolving accounts.
I find it valuable and impressive. Big thanks for sharing. It is fairly easy to calculate the loan to mortgage ratio. It simply requires knowing approximately how much your home is worth, the amount of the outstanding mortgage and the amount of the original down payment.
ReplyDeleteNice post mate, keep up the great work, just shared this with my friendz www.slickcashloan.com
ReplyDelete