Understanding Your Debt to Income Ratio
Understanding Your Debt to Income Ratio

While your debt to income (DTI) ratio is a key component of your credit health, it doesn't directly affect your credit score. It does, however, play a role in your credit application when you are applying for a major loan or mortgage.


What is My Debt to Income Ratio?

Your DTI ratio helps lenders evaluate how much additional debt you can handle and how much of a credit risk you pose. It is calculated by dividing your monthly income by your total monthly debt payments, including minimum credit card payments, auto loan and student loan payments and any other regular debt obligations. Your income isn't reported in your credit report, so the lender will often request either a self-reported estimate or documentation confirming income.

While your DTI ratio isn't one of the five key factors that calculate your credit score, it has a significant impact on your ability to get credit.


How Does My DTI Ratio Impact My Credit?

Lenders scrutinize your DTI ratio when you are applying for credit because it's an indicator of your ability to repay your debts. Lenders tend to set your interest rates according to the risk you pose.

If your DTI ratio is low, then you are likely to repay your debts because you have the income available. If your DTI ratio is high, then you may be overwhelmed by debt and unable to pay back new debt obligations. The standard rule of thumb is that your DTI ratio should be less than 36 percent, as lenders generally require that borrowers have a DTI ratio no higher than 40 percent in order to qualify for a mortgage. A DTI ratio as high as 36 percent puts you at risk of paying higher interest rates, or being denied altogether. Note that some types of mortgages will allow a DTI ratio above 40 percent, such as Federal Housing Authority mortgages and Veterans Administration mortgages.

If you want a quick picture of what your debt to income situation should look like, try this simple calculation. Approximate your monthly gross income and multiply that number by 36 percent. For example:


$2200 (Gross monthly income) X .36 (Percentage that your DTI ratio should be below)

= $792 (Amount your total monthly debt payments should not exceed)


This calculation gives you a quick guideline of what a comfortable debt load looks like for your monthly income.

What If My DTI Ratio is too High?

If your DTI Ratio is too high, you can either increase your income or lower your total monthly debts. You may be able to increase your income by taking on second job, getting a raise, or finding alternative streams of income such as starting a small business. To lower your total monthly debt payments, fully pay off loans or credit cards, refinance your loans to lower your individual monthly payments, or attempt debt consolidation.


All Comments
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Helpful to 112 out of 129 people

Where does credit karma obtain my income amount to compute the DTI? I couldn't fine anywhere on their site where I can supply that info.

Comment by
svetlana1975

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112 People Helped
Helpful to 22 out of 26 people

on the My Credit tab, go to Credit Report Card, scroll down to DTI. enter gross monthly and save

Reply by
gonzomic

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Helpful to 35 out of 43 people

If you go to your Credit Report Card, you will get "grades" for things like; utilization, on-time payments, age of accounts, ect. At the bottom of that list is Debt To Income Ratio and a place to input your Reported Monthly Household Income

Reply by
Reneedeniseblaze

2 Contributions
39 People Helped
Helpful to 1 out of 1 people

very helpful! know i understand

Reply by
eebarron

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1 Person Helped

In the credit report card area, the last question asks you to estimate your monthly income.  That is where they obtain it to computer the DTI.

Reply by
davidweeks256

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5 People Helped

i don't own the credit card that brought down my overall credit for september by 21 pts how do i fix this.  i called the credit card company the find out if someone was using my information to obtain this credit card they assured me i don't have one they checked by using my ss# and name i email this site to take this credit card off my profile because i don't own it and it has brought down my score by 21 pts. but have heard nothing back any suggestions? from anyone? please???? brooklyngirl55 thanks

Reply by
brooklyngirl55

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0 People Helped

There is a space at the bottom of the credit report card to enter it

Reply by
cnmotley

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0 People Helped

I belive you originally set up your monthly income when setting up your Credit Karma Profile. If I am mistaken, you can enter this manually by clicking on the My Credit tab ( Should be the very first tab) select the sub catagory of Credit Report card, scroll to the very bottom of this page where you will find Debt to income ratio section with an input box where you manually input your estimated monthly household income. Hope this helps.

Reply by
bmcewen1513

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0 People Helped

I think they ask that question when you join the page the first time. 

Reply by
ILOPES

4 Contributions
2 People Helped

In your credit report card at the bottom there is a debt to income ratio, You can enter your estimated monthly income there.

Reply by
CForlai

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0 People Helped

Gross income is provided by the user under My Credit -> Credit Report Card -> Debt to Income Ratio - "Reported Monthly Household Income: "

Reply by
cnraghu

1 Contribution
0 People Helped

When you signed up for credit karma, it asked you for your income, so they're numbers were computed based off of what you entered into their site when you first signed up......

Reply by
wsilas

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Helpful to 21 out of 23 people

Not mentioned in this article is one more reason to keep your DTI as low as possible: if your income is unexpectedly reduced, a low DTI will reduce any adverse effect on your credit score. Essentially, it is a prophylactic (protective) measure against downturns in your personal finance situation.

Comment by
AllSeasonRadial

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Helpful to 10 out of 10 people

Thanks for the additional info. That is good to know

Reply by
shellnlq

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Helpful to 8 out of 8 people

If you are an authorized user on someone else's account, does this show up as your credit also? 

Comment by
dalejrlvr88

5 Contributions
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Helpful to 5 out of 7 people

Yes,  that is why my credit usage is where it is, due to being an authorized user with a limited amount of credit on an account that belongs to my fiance.

Reply by
davidweeks256

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Helpful to 4 out of 4 people

Make sure if applying for credit card, use the card and pay off balance in few months or when u can.faster the better!

Comment by
raiderz707

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Helpful to 4 out of 4 people

why is my rating so low.  I don't owe anything on it, nor do I have one bill that is past due, Please help me.   

Comment by
cmiss

1 Contribution
4 People Helped

All of our credit report information comes straight from your TransUnion credit report. Check your full credit report at AnnualCreditReport.com for more information.

Review by
CK Moderator

Helpful to 7 out of 8 people

Does debt payments include your utility payments and things like that?

Comment by
musictonya

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Helpful to 5 out of 5 people

no, they mean credit cards and loans.

Reply by
kimproctor2002

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Helpful to 5 out of 6 people

@musictonya: utility payments, telephone bills, cable TV, rent (or mortgage payments) and so on are better regarded as "fixed expenses". Fixed expenses are the costs you can expect to remain the same month after month for long periods of time.

Fixed expenses are the easiest to budget for, because they are the easiest to prioritze—  for instance, rent gets paid before the cable TV bill. Fixed expenses always top the list of bills to be paid; any money left after that is "discretionary". Fixed expenses are the best way to decide if you are living above or below your means.

Having a clear understanding of your own personal fixed expenses is the best way to decide whether you need to adjust your lifestyle to match your income (to attain your financial goals or to meet financial obligations, for instance). And if you decide to adjust your lifestyle (either up or down), the clear understanding of your fixed expenses is absolutely crucial to doing it in the most effective and painless way.

Reply by
AllSeasonRadial

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no debt payments does not include utility, water,phone,groceries etc. thats what they want to know. so if you do qualify  the company wants to know if you have enough to live on. that is what i was told.

Reply by
happi2007

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Helpful to 4 out of 5 people

 If you go to your Credit Report Card, you will get "grades" for things like; utilization, on-time payments, age of accounts, ect. At the bottom of that list is Debt To Income Ratio and a place to input your Reported Monthly Household Income

Comment by
Reneedeniseblaze

2 Contributions
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Helpful to 5 out of 7 people

No matter what value I put in as my monthly income it always shows $1,250 and also says my monthly debt is $791 for DTI of 63% (a terrible score).  My income is >$10k a month and I have no debt other than mortgage so I'm not sure how to get this piece working.  When I go to the screen to enter my income, it shows what I typed in last - but the score center refuses to show anything but the $1250/$791 number.  :-(  Ideas?

Comment by
sparger

2 Contributions
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Helpful to 3 out of 5 people

I have EXACTLY the same issue, but in my case I have solid income from two government retirements and ZERO debt. No car payments, mortgages and nothing on the credit cards.

So how is it that I have the same $1,250 payments and yet I have ZERO?

Reply by
Aero10

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Helpful to 1 out of 2 people

how can child support on your cridet when you have no kid born in united state

Comment by
dannyboy57

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1 Person Helped

All of our credit report information comes straight from your TransUnion credit report. Check your full credit report at AnnualCreditReport.com for more information.

Review by
CK Moderator

This article was helpful in learning about credit scores and how they are determined

Comment by
Weasel24

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