Tuesday, May 4, 2010

Debt To Credit Ratio

Many people would like to know what exactly is a "debt to credit ratio."

It's really easy:

Let's say you have a credit card with a line of credit for $10,000. And now let's say you owe $2,000 on that card. Assuming that card is the ONLY line of credit you have and you don't owe ANY other money to anyone else... then your debt to credit ratio is 20%.

$2,000 divided by $10,000 is 20%, right?


So, if you have three credit cards with a total line of credit of $20,000 and you owe $8,000 on those cards.. then your debt to credit ratio is? 40%

Most lending institutions would like to see this ratio be no higher than 30% as mentioned in yesterday's finance for actors post.

No comments:

Post a Comment