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What is the Debt to Income Ratio?
The debt to income ratio "... compares gross income (before-tax income) to the debt load a household is carrying" (11 Blancing Credit and Debt). A person with a high debt ratio will have difficulty paying off loans because their debt is high in comparison tot the amount of income they earn. As a result, lenders might not give a person with a high debt to income ratio a loan because they afraid the customer will not be able to repay them. -
What my Debt to Income Ratio will be in the Future
In the future, I hope that I will have a low debt to income ratio to demonstrate that I "... have a good balance between debt and income" (12 Balancing Credit and Debt). The lower I keep my ratio, the more likely it is I'll be able to receive a loan if I needed one. "Your debt-to-income ratio can be a valuable number -- some say as important as your credit score" (12 Balancing Credit and Debt). -
What Actions to Avoid to Prevent Your Credit Score from Going Down
Avoid being late to pay your bills. Not paying you bills on time will display to lenders that you have difficulty finding the money to pay. Try not to get close to maxing out your credit card because lenders look at how much credit you use and how close you are to using up all your credit. Stay away from applying for credit that you don't need. Applying for a lot of credit in a short amount of time will show lenders that you depend on the credit. These are just a few actions you can avoid. -
Works Cited
http://www.lenglemortgageprofessionals.com/why-debt-to-income-ratio-is-the-cornerstone-of-any-mortgage-loan-approval/
https://www.wsfcu.org/understanding-your-debt-to-income-ratio/
https://mycucommunity.com/blog/2017/02/07/12-surprising-ways-to-wreck-your-credit-score
https://www.cebuanalhuillier.com/10-ways-to-avoid-having-a-bad-credit-history/ -
How to Achieve a High Credit Score Now and in the Future
-Pay your bills on time: keep up with your payments by setting reminders and automatic payments
-Don't get close to your credit limit: "Experts advise keeping your use of credit at no more than 30 percent of your total credit limit" (13 Balancing Credit and Debit).
-Have a long credit history: the more experience you have with getting and paying credit, the easier it is to determine if you are a good credit risk.
-Apply for credit that you need: don't apply for a lot of credit all at once
