Because he wants to be sure his new tenant pays the rent on time and in full, the table below shows information that was on their applications.
| Application information |
|---|---|---|
| Questions | Jaina | |
| How many years have you had your job? | 5 | |
| What is your monthly salary? | $1,850 | |
| How many credit cards do you have? | 4 | |
| How much debt do you have? | $13,000 | |
| How many times were you late with payments on credit cards in the past year? | 5 |
Who will the landlord decide to be more creditworthy and why?
A. Tomas because the ratio of his debt to income is less.
B. Jaina because she has had her job longer, which makes her look more stable.
Answer (2)
Calculate Jaina's debt-to-income ratio using annual income: 22200 13000 ≈ 0.5856 .
Calculate Jaina's debt-to-income ratio using monthly income: 1850 13000 ≈ 7.03 .
Evaluate the given options based on the available information.
Since we lack information about Tomas, we can only consider Jaina's positive job tenure, making the answer: Jaina because she has had her job longer, which makes her look more stable.
Explanation
Analyzing the Problem We are given Jaina's application information and need to determine who the landlord will consider more creditworthy. We have two options to evaluate: Tomas's lower debt-to-income ratio and Jaina's longer job tenure. However, we only have Jaina's data, so we'll analyze her situation and see if we can make a determination based on the options provided.
Calculating Debt-to-Income Ratio First, let's calculate Jaina's debt-to-income ratio. Her total debt is $13,000, and her monthly income is $1,850. The debt-to-income ratio is calculated as:
Calculating Annual Income and Debt-to-Income Ratio Debt-to-Income Ratio = Annual Income Total Debt Since we have monthly income, we should use annual income for a more accurate ratio. Jaina's annual income is $1,850 \times 12 = 22 , 200. T h ere f ore , h er d e b t − t o − in co m er a t i o i s : 22200 13000 ≈ 0.5856 $
Calculating Debt-to-Monthly Income Ratio Alternatively, we can calculate the debt-to-monthly income ratio: 1850 13000 ≈ 7.03
Evaluating the Options Now, let's analyze the given options:
Option 1: "Tomas because the ratio of his debt to income is less." We don't know Tomas's debt-to-income ratio, so we can't evaluate this.
Option 2: "Jaina because she has had her job longer, which makes her look more stable." We don't know how long Tomas has had his job, so we can't directly compare. However, Jaina has had her job for 5 years, which is a positive factor.
Jaina's debt-to-income ratio is approximately 0.5856 (using annual income) or 7.03 (using monthly income). She also has 4 credit cards and has been late on payments 5 times in the past year, which are negative factors.
Conclusion Since we don't have any information about Tomas, we can't definitively say who is more creditworthy. However, Jaina's 5 years of job tenure is a positive aspect of her application.
Examples
When a bank is deciding whether to approve a loan, they look at factors like your income, debt, and employment history. Calculating the debt-to-income ratio helps them understand how much of your income goes towards paying off debts. A lower debt-to-income ratio generally indicates that you're more likely to be able to repay the loan. Similarly, a longer employment history suggests stability and reliability, making you a more attractive borrower.
Based on Jaina's long job tenure of 5 years, she is likely to be considered more creditworthy by the landlord, despite having a high debt-to-income ratio and a history of late payments. Since we lack information about Tomas, we can't make a direct comparison. Therefore, the chosen option is: 'Jaina because she has had her job longer, which makes her look more stable.'
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