Calculate Your Debt-to-Income Ratio
Use this guide to calculate your debt-to-income ratio:
Monthly mortgage or rent $________
Monthly gross salary $________
Total debt divided by total income = _______%
36% or less: This is an ideal debt load to carry for most people. Showing that you can control your spending in relation to your income is what lenders are looking for when evaluating if you are credit-worthy.
37% to 42%: Your debts still may seem manageable, but start paying them down before they begin to spiral out of control. At this level, credit cards still may be easy to obtain, but acquiring loans may be more difficult.
43% to 49%: Your debt ratio is high and financial difficulties may be looming unless you take immediate action.
50% or more: Seek professional help to make plans for drastically reducing your debt before it becomes a real problem.
Copyright 2007 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.