How to calculate your debt and income ratio

The lender uses your debt / income ratio (the amount you owe on your credit card and the loan compared to the amount you earn) to help assess your credibility.

Step 1
Add your total monthly net income. This includes your monthly salary and any overtime, commission or guaranteed bonuses; plus the pension received, if any. If your earnings change, calculate a monthly average over the past two years. Include any rental income or any other additional income.

Step 2
Add your monthly debt obligations. This includes all your credit card bills, loans and mortgage payments. Be sure to include your monthly rent payments if you rent.

Step 3
Break down your total monthly debt obligation for your total monthly income. This is your total debt / income.

Step 4
Take action if your odds are higher than 0.36, which industry experts will call a score of 36. The lower the level, the better. Any score higher than 36 may increase interest rates or pay for the loan you apply.

How to calculate your debt and income ratio

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