Question

tom was recently turned down for a loan. he would like to re-apply next year for the same loan. which of the following is not a change he could make to increase his chances of being approved for the loan?
a. pay off some of his credit cards to decrease his debt-to-income ratio.
b. take out some more credit cards to increase his monthly debt.
c. find another job that pays more, increasing his gross monthly income.
d. improve his credit score by making all credit card and loan payments on time.

Explanation:

Analyze the question goal

The question asks to identify which of the given options is not a change Tom could make to increase his chances of being approved for a loan next year.

Evaluate option A

Using the Debt-to-Income Ratio and Lending Criteria knowledge points:
Paying off credit cards reduces outstanding debt. This decreases the debt-to-income ratio, which lenders view favorably. Thus, this change increases his approval chances.

Evaluate option B

Using the Lending Criteria knowledge point:
Taking out more credit cards to increase monthly debt raises his total financial obligations. Lenders prefer lower debt levels relative to income. Increasing monthly debt decreases his approval chances. Therefore, this is not a change that would help him.

Evaluate option C

Using the Lending Criteria knowledge point:
Finding a higher-paying job increases gross monthly income. A higher income lowers the debt-to-income ratio and shows greater capacity to repay, increasing approval chances.

Evaluate option D

Using the Credit History knowledge point:
Improving his credit score by making all payments on time demonstrates financial responsibility. A higher credit score directly increases loan approval chances.

Answer:

• a. Pay off some of his credit cards to decrease his debt-to-income ratio.
• b. Take out some more credit cards to increase his monthly debt. (Correct answer)
• c. Find another job that pays more, increasing his gross monthly income.
• d. Improve his credit score by making all credit card and loan payments on time.