C.U. Smarter - A financial education focus of Veritas Federal Credit Union, located at 276A Nissan Parkway in Canton

What is Debt-to-Income Ratio?

Are you looking to borrow money soon? If so, understanding your Debt-to-Income Ratio is wise.

Debt-to-Income (DTI) Ratio is one way lenders measure your ability to manage monthly payments to repay the money you plan to borrow.

To calculate DTI, add all your monthly debt payments and divide by your gross monthly income.

If you plan on getting a loan soon and need to improve your DTI, the following tips can help:  

• If possible, making extra payments towards your debts can help lower your DTI ratio.
• Try to avoid making unnecessary large purchases on credit to help keep your credit card use down.
• Keep an eye on your DTI and try not to let it get above 43%, since that's the max some lenders will accept.
• You could also get some extra income from freelance work or a part-time job to increase your gross monthly income.

 If you’re worried about your credit score, stop by Veritas FCU, and let’s see how we can help.