When you apply for a loan or line of credit at RBC Royal Bank®, we look at your ability to repay the money by checking your credit rating history and using mathematical formulas to determine the balance between your income and your debt. If you have a good credit rating and your total debt service ratio shows that you can comfortably manage the additional credit, you will likely be approved. If you are not approved, we will help you understand why.
Your total debt service ratio is the percentage of your gross income that goes towards paying off your different credit obligations each month.
|Your monthly mortgage payment||$1,200.00|
|Your monthly credit card payments (average)||$800.00|
|The monthly installments on the credit you're applying for||$350.00|
|Total monthly payments||$2,700.00|
|Your monthly income before taxes||$7,000.00|
|Your total debt service ratio is||38.57%|
In the example above, the total monthly payments help determine your capacity to handle debt. Most lenders will use total debt service ratio as one of the measures in assessing your credit application. Generally, the lower your debt service ratio, the more likely you will be able to meet all of your commitments.
Note that the total debt service ratio does not take into account any other payments or financial obligations you have outside of those that appear on your credit report. For example, the total debt service ratio does not include items like groceries, transportation, child care or insurance, as these are considered "lifestyle expenses." When you are applying for additional credit, it's important to consider the impact your new payments may have on your lifestyle expenses.
Here are some tips for increasing your chances of being approved for a loan or line of credit at RBC Royal Bank:
For tips and expert advice on managing your credit, call 1-800-769-2511 to talk to a credit specialist.