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Personal Banking > Loans & Lines of Credit > Understanding Credit > Credit Approval Process

Credit Approval Process

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.

What is Total Debt Service Ratio?

Your total debt service ratio is the percentage of your gross income that goes towards paying off your different credit obligations each month.

For example
Your monthly mortgage payment $1,200.00
Your monthly credit card payments (average) $800.00
Property taxes $350.00
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.

Increasing Your Chances of Being Approved for Credit

Here are some tips for increasing your chances of being approved for a loan or line of credit at RBC Royal Bank:

  • Maintain a good credit rating history by making payments on time.
  • If you do not have a good credit rating history, talk to an RBC Royal Bank credit specialist, who can help guide you.
  • If you have outstanding loans or credit card debts, try to pay off as much as possible and pay down your highest interest rate debt first. For more information, try our Debt Reduction Plan.
  • If you have a high total debt service ratio, talk to an RBC Royal Bank credit specialist. Acceptable total debt service ratios differ from lender to lender and, in some cases, a high total debt service ratio may be offset by other factors more favourable to you.
  • For additional tips, see the 5 Principles of Better Borrowing.
 

We're Here to Help

For tips and expert advice on managing your credit, call 1-800-769-2511 to talk to a credit specialist.

 
 

Take Action

  • Apply Now
  • Call 1-800-769-2511 to talk to a credit specialist