debt to income ratio

It is important to spend less money than you earn, if you want to stay out of debt.  But this can be more difficult than it seems. Your debt to income ratio is an important part of your overall credit history.  But if you’re unable to control your spending and spend more money than you earn, your debt to income ratio will be high, making it hard to finance a home or make major purchases.

Factors Used to Calculate Debt to Income Ratio

Two basic factors are used to calculate your debt to income ratio, your net worth and your total debt. The credit industry has standard guidelines to determine if your debt to income ratio is too high. The standard may be a bit low due to the fact that many have an acceptable debt to income ratio but still struggle to pay monthly expenses.

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