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      08-16-2009, 08:08 PM   #5
Second Lieutenant
DaRickSta81's Avatar

Drives: 2009 328xi Coupe
Join Date: Jun 2009
Location: Toronto, Canada

iTrader: (4)

Garage List
2009 328xi, e92  [0.00]
2006 325i, e90  [0.00]
I believe one leads to the other.

Your overall approval amount is a calculation based on your previous history of making on-time payments and your net income.

I remember when I applied for a mortgage; the bank looked at my credit history; but was more so interested in what my take-home pay (after taxes) was minus all other expenses (utilities, car, insurance, etc.). I believe banks (and finance orgs - i.e. BMW Financial) uses this approach and figures out how much you can afford to pay per month given your net income and your credit history.

If you think about it, it makes sense.. say Bob makes $12,000 a year after taxes, his monthly take home pay would be $1000. Assuming Bob only spends $100/mth on his Credit Card and has no other expenses (lives at home, doesn't eat, doesn't do anything else); his maximum ability to pay back a loan is limited to $900/mth. So, even if Bob has a perfect credit score because he was able to pay off his $100 credit card balance on-time for the last 10 years; it doesn't mean he can get a $1200/mth loan term. Unless of course, he had a friend at AIG who can sell him some high-ratio loan insurance