How to Figure Out Debt to Credit Ratio

When you apply for a loan, a lending institution looks at a number of different calculations to determine how likely it is that you will be able to pay back the loan. Your debt-to-credit ratio is one of these calculations, and it has a direct impact on your credit score, which is a basis for most lending decisions. By understanding this ratio, and how to keep it in line, you can take steps to raise your credit score, and therefore to raise your chances of getting that new loan.

Instructions

1

List all the debt you have on revolving credit accounts, such as credit cards and lines of credit. Then list all the credit limits on these accounts. For example, you might owe $5,000 on a credit card with a $10,000 credit limit.

2

Add up all of your debts. Then, separately, add up your credit limits.

3

Divide your total debt by your total credit limit to find your debt-to-credit ratio. For example, if you have $10,000 in total debt and a $50,000 credit limit, your debt-to-credit ratio is .2, or 20 percent.