The debt to income ratio is one of their total monthly debt payments to their total monthly income, expressed as a proportion or percentage. This is a fairly simple calculation but can be deceiving unless you include all obligations and all income in the calculation.

The calculation of debt to income is a simple. You simply divide the total monthly debt payments of their total net revenue (ie their income after tax). While some debt is inevitable and may even be desirable to achieve its financial targets the real question is how much debt is too simply where to draw the line. Obtaining credit is often a function of a loan officer calculation of debt to income ration as a way to determine their ability to cope with new obligations. Too high a debt to income ration will also have a negative impact on your score Fico, often obtained by making credit more expensive than they need be. Then I suggest categories for inclusion in the calculation of its debt to income to see if their position.

Monthly debt payments to take into account:

Mortgage or rent payments
The payments on a home loan
Payments Car
Payment of student loans
Minimum credit card payments times 2
Other outstanding loans amounting payments
Payments of child support

Revenue per month to consider:

Total net or take-home pay
The child support or alimony payments received
1099 Earnings after tax divided by 12
Other monthly income

Now add debt and income and divide.

The above list is only a guideline to gather personal information. It may include all possible aspects of its debt / income, but you may have to add categories or not to use some of the categories in its calculation. If you add lines to their debt calculation does not include bills for services or products unless you have placed such bills under a payment plan as the establishment of a fixed payment plan with your dentist. Under the income does not include unexpected, as once the gifts, a solution insurance, an inheritance or lottery winnings.

So now he has done the calculation. How can we answer the question how much is too much? When applying for credit, the loan officer to see their debt to income as a factor to make a decision but is not the only factor considered. The same debt to income may be great for one family, but may have a negative impact in another. The debt interest rates at the end are a subjective tool for loan officers to make decisions about your ability to cope with a new obligation. There are some general guidelines, however, that will give you a reasonably solid picture of where you stand in the eyes of a loan officer.

30% or less is generally regarded as an excellent relationship of the vast majority of officers loans
20% – 36% is a good ratio and most likely not cause any problems with official loans or have a negative impact on your score Fico
36% – 40% puts you on the edge of the limits of acceptability. Most lenders will ask for an explanation of why their debt to income is so high. In addition, a debt to income in this range is beginning to have a negative impact on your score Fico lenders to see other strong numbers before making a decision to loan more money for you
40% or higher sends red flags with lenders and its Fico scores. Often, that a high proportion are murdered an agreement with the majority of lenders

In calculating its own debt to income begin to get a handle on their own financial situation. If the ratio is too high tells you is too deep in debt and you must do something to reduce debt. Of course, if very low then you need to do anything. For most lenders and the effects of debt to income at its Fico Positive reducing the ratio is presumed to be a sign of a healthy financial condition and goes a long way in improving their credit history.