Bankers are notoriously stingy. Remember applying for your first car loan, and the banker in the polyester suit telling what you can afford versus what you desired? BMW versus a Ford?
He or she was basing that yes-or-no decision on your back-end ratio. No, that is not the size of your butt compared to your waist. A back-end ratio is just a calculation to show how much dough you have left from your current income after paying your current bills. Most banker boys (or girls) call it a debt-to-income ratio.
Related or Semi-related Video
![Finance: What is a Credit Limit?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.699_770x433.jpg)
Finance: What is a Credit Limit?39 Views
Finance, a la shmoop. What is a credit limit? Alright people well simply put the
maximum amount you get to charge or use on a loan or credit account, that's a [Credit limit definition written on a 100 dollar bill]
credit limit. So yeah it's that thing that keeps toddler Joey from ordering
two hundred thousand dollars worth of Snickers bars. [Toddler looking at the snickers bar]
If you accidentally you know leave out your Amex. (Illustrative example time) If you have a ten thousand
dollar line of credit or credit card you can't spend $20,000 on a trip to Vegas,
sorry. You might be able to go on a smaller trip to Atlantic City but once [Picture of Atlantic City]
you hit that 10 grand well the party's over until you pay some of that money [$10,000 flashing in red]
back, and by the way taking that smaller trip and then putting everything on red [Chips landing on a roulette table]
22 in hopes of funding your next trip to Vegas? Probably not the soundest
financial planning... sorry, let's keep it real. [Guy putting on a serious face]
Up Next
What is an Accredited Investor? An accredited investor, according to the SEC, is an individual with income of $200,000 or more and $300,000 and abo...
What are Credit Scores and Worthiness? One of the most ubiquitous ways that digital society now dictates our lives is with business and personal cr...
What is the Equal Credit Opportunity Act? Signed into law during the Nixon-Ford era in 1974, the Equal Credit Opportunity Act is essentially an ant...
What is the Fair Credit Reporting Act? The Fair Credit Reporting Act that governs credit reporting agencies and all activities that occur involving...