Are Credit Cards Always Included In Debt-To-Income (DTI) Ratios?
Does credit card expenses impact your debt to income ratio? George Souto explains on the blog below that most definitely it will impact your ratio. So if you cosigned for your college student to obtain a credit card, keep in mind that the balance might affect your liabilities and ability for make future purchases..
Are Credit Cards Always Included In Debt-To-Income (DTI) Ratios. Back at the beginning of last month (9/10/13) I wrote a blog "Does Co-Signing For Someone Impact The Ability To Purchase A Home?". The blog was about the impact Co-Signing for someone else can have on your Credit Scores, and ability to make future purchases such as a home. As I mentioned in the blog it is not unusual for parents these days to co-sign for their children for such things as:
- Car loans
- Cell phones
- Student Loans
Co-signing for these types of debts can have an impact on your Debt-To-Income (DTI) Ratios. However, debts such as these are considered "Contingent Liabilities" and can be eliminated from your DTI, if the person you co-signed for has been:
- Making the monthly payments on the debt for at least 12 consecutive months.
- Does not have a history of being delinquent on the monthly payment.
But this guideline does NOT apply to all debts, to be more specific it does not apply to Credit Cards.
It is not unusual for a parent to assist their children in establishing credit. The most common and quickest way to do so is to co-sign for a Credit Card for the child. So why is this any different than co-signing for car loans, cell phones, student loans? The difference is those debts are not revolving debt and considered "Contingent Liabilities", Credit Cards are revolving debts, and are NOT considered a "Contingent Liability". Anyone authorized to use the Credit Card can use it, and impact the balance.
In the case of a revolving debt like Credit Cards, it does not matter how long one of the authorized users can demonstrate they have been making the payment, because Credit Cards can NEVER be eliminated from the other authorized users debt liability. So Are Credit Cards Always Included In Debt-To-Income (DTI) Ratios? YES, as long as they continue to be a authorized user on the Credit Card, it will ALWAYS impact their Debt-To-Income Ratios.
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Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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