Your Questions Answered
If you don't find the answers to your questions here, please contact a credit specialist.
How does RBC Royal Bank decide whether or not to
approve my application for credit?
When you apply for a Royal Credit Line, Personal Loan or an RBC Royal Bank Visa card, you must demonstrate your ability to repay. In addition to checking your credit history from the credit bureaus and rating you on it, we use mathematical formulas to determine the balance between your income and your debt. If you have good credit and our calculations show that your total debt service ratio will allow you to comfortably manage the additional credit you're applying for, you will likely be approved. If you are not approved, we will help you understand the reasons why.
What is total debt service ratio?
Your debt service ratio is the percentage of your gross income that goes towards paying off your different credit options 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 |
| Your debt service ratio is |
38.57% |
In the above example, the total monthly payments help determine your capacity to handle debt. Most financial Institutions will use total debt service ratio as one of the measures in assessing your credit application. Generally, the lower the debt service ratio the more likely you will be able to meet all your commitments and to protect you in the event interest rates rise.
How can I improve the likelihood of being approved?
The better your credit rating history, the more likely it is that you will be approved for credit by RBC Royal Bank.
Also you must be able to demonstrate the means to repay the credit you are applying for. Lenders will consider your debt to income ratio. If you have outstanding loans or credit card debts, try and pay off as much as possible. Since acceptable debt to income ratios may differ from lender to lender, talk to a credit specialist about the loan you are interested in. In some cases a high debt to income ratio can be offset by other factors more favourable to you.
If you do not have a particularly good credit rating history, an RBC Royal Bank credit specialist can help you reduce or eliminate your debt and start to improve your credit history. You may also want to consider a secured loan as the first step to establishing a better credit history.
Other questions?
Ask an RBC Royal Bank credit specialist for answers.
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