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Jaina and Tomas are being considered as new tenants in an apartment. The landlord looks at their creditworthiness because he wants to be sure his new tenant pays the rent on time and in full. The table below summarizes the information that was on their applications.

\begin{tabular}{|c|c|c|}
\hline \multicolumn{3}{|c|}{Application Information} \\
\hline Questions & Jaina & Tomas \\
\hline How many years have you had your job? & 5 & 2 \\
\hline What is your monthly salary? & \[tex]$1,850 & \$[/tex]2,500 \\
\hline How many credit cards do you have? & 4 & 1 \\
\hline How much debt do you have? & \[tex]$13,000 & \$[/tex]7,000 \\
\hline \begin{tabular}{l}
How many times were you late with payments on credit \\
cards in the past year?
\end{tabular} & 5 & 1 \\
\hline
\end{tabular}

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.
C. Jaina because she has more credit cards available to her.



Answer :

GinnyAnswer
Let's analyze the given information about Jaina and Tomas and understand how their creditworthiness can be evaluated using various factors.

1. Debt to Income Ratio:
The debt-to-income ratio indicates how much of a person's income goes toward paying off debt. A lower ratio suggests better creditworthiness, as it implies the person has a manageable level of debt relative to their income.

For Jaina:
- Annual income = [tex]\( \$1,850 \times 12 = \$22,200 \)[/tex]
- Debt-to-income ratio = [tex]\( \frac{\$13,000}{\$22,200} \approx 0.5856 \)[/tex]

For Tomas:
- Annual income = [tex]\( \$2,500 \times 12 = \$30,000 \)[/tex]
- Debt-to-income ratio = [tex]\( \frac{\$7,000}{\$30,000} \approx 0.2333 \)[/tex]

Tomas has a lower debt-to-income ratio (0.2333) compared to Jaina (0.5856), indicating he might be more capable of handling new financial responsibilities.

2. Job Stability:
The length of time someone has been employed at their current job can reflect job stability. Longer job tenure can imply that the person is less likely to experience sudden income loss.

- Jaina has been at her job for 5 years.
- Tomas has been at his job for 2 years.

Thus, Jaina's longer job tenure indicates higher job stability.

3. Number of Credit Cards:
Having multiple credit cards could indicate experience in managing credit, though it could also pose a risk if those cards are not managed responsibly.

- Jaina has 4 credit cards.
- Tomas has 1 credit card.

More credit cards might imply that Jaina has a higher level of experience managing credit, but it’s essential also to consider the number of late payments they’ve had.

4. Payment History:
The number of times someone has been late with payments reflects their reliability in meeting financial obligations punctually.

- Jaina has been late 5 times in the past year.
- Tomas has been late 1 time in the past year.

Tomas has demonstrated better payment reliability compared to Jaina.

Based on these points:

- Debt to Income Ratio: Tomas is more creditworthy due to a lower debt-to-income ratio.
- Job Stability: Jaina has better job stability with a longer job tenure.
- Credit Management and History: Jaina has more credit cards, which may suggest more experience. However, Tomas has a better record of making timely payments.

Final Decision:
The landlord might consider Tomas more creditworthy because his debt-to-income ratio is lower, suggesting that he has better financial management in relation to his earnings. Although Jaina has been at her job longer and has more credit cards, Tomas's lower debt ratio and fewer late payments make him appear more reliable financially. Therefore, Tomas is likely the better candidate for creditworthiness primarily because he has a lower debt-to-income ratio and fewer late payments.

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