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How to Calculate Your Debt-to-Income Ratio

Lenders look at more than just your credit score when you apply for credit.  They also evaluate whether you can afford to take on another payment.  To help them decide, they will calculate your debt-to-income (DTI) ratio.

DTI is an important consideration when you’re deciding whether to apply for credit.  It can help you determine how comfortable you are with current debt and assess your ability to borrow more.

How to calculate your debt-to-income ratio

Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it’s the percentage of your gross monthly income (income before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt. To calculate your debt-to-income ratio:

Step 1:Your debt-to-income ratio is calculated by adding up all your monthly debt payments and dividing them by your gross monthly income.

Add up your monthly bills which may include:

  • Monthly rent or house payment
  • Monthly alimony or child support payments
  • Student, auto, and other monthly loan payments
  • Credit card monthly payments (use the minimum payment)
  • Other debts

Note: Expenses like groceries, utilities, gas, and your taxes generally are not included.

Step 2:

Divide the total by your gross monthly, which is your income before taxes.

Step 3:

The result is your DTI, which will be in the form of a percentage.  The lower the DTI; the less risky you are to lenders.  For more information, see Understand what your ratio means.

Use our calculator to to check your debt-to-income ratio

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