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Ratio
Ratio
Lenders ranging from credit-card companies to mortgage companies to auto-lease providers look at your debt-to-income ratio to determine the strain of your overall debtload, and to gauge whether you're a high-risk borrower. You can -- and should -determine your own debt-to-income ratio so that you'll know before you visit a lender how your credit looks. Plus, it will help you to better manage your debt by forcing you to realize how much of your income is consumed by debt. Fill in the green boxes: Credit Provider Monthly payment
Debt-to-income calcuation Total monthly debt $ Monthly after-tax income = = Debt-to-income ratio
What Your Debt-to-Income Ratio Means 10% or below 10% to 20% 20% to 30% 30% and above
You're managing your credit well. You're still a good credit risk. You're bordering on being a bad credit risk. You're likely viewed by creditors as a high-risk borrower, and might need c
Adapted from "The Wall Street Journal Personal Finance Workbook," by Jeff D. Opdyke.
Copyright 2006 by Dow Jones & Co. Published by Three Rivers Press, an imprint of the Crown Publishing Group, a division of