Credit Card Debt Ratio

Do credit bureaus look at the total amount your borrow from all your credit card to calculate your debt ratio? Is it better to borrow equally from all your credit cards or have one maxed out and others untouched or not?

Your debt ratio is calculated by adding up all your various credit limits (say a Visa with $5,000; a Discover card with $4000; a Macys charge with $1000) to arrive at your total credit ceiling. In this case it would be $10,000. You do NOT want to owe more than 30% of this total number or you will be perceived as over-extended to lenders. So, in this case, no debt over $3,000 if you were shopping for a loan. Keep in mind that credit reports show historical high balances on your credit cards, so a lender will see if you have ever maxxed out a credit card (not the best sign). Shuttling all your debt onto one low interest card is a smart move if you're trying to pay down your debt. Otherwise, lenders like to see you using a range of credit across several cards (from major credit cards to store charges). They are looking for responsible usage patterns when evaluating your credit. Above all, do what you need to do to pay down debt first, ahead of any other considerations.

The big no-no is closing down one of your credit cards in the mistaken belief that this will help your rating. All you wind up doing is reducing your total credit limit which then pushes your debt to credit limit higher. For example, take the imaginary $3k debt above. If you close your Discover card, you lose $4k in credit limit. That takes your total credit limit down to 6k - and now that 3k you owe represents 50% debt, way over the "allowable" limit. Instead of closing the account, just don't use it. But let the credit limit work for you.

2007-01-29 07:10:19 by Rona9

LeahCoss.ca How Do I Qualify for a Mortgage? Total Debt Service Ratio (TDS) What is TDS & when is it used? ● Anytime you want to qualify for ...

What's the best solution? Our debt to income ratio is close to 60%. We have over $40,000 in credit card debt. My husband makes between $60,000 and $70,000 a year. I left my job this year because of my health. Some of our credit card debt is from 2 surgeries I had last year. We pay all of our bills on time, but can only make the minimum payments on our credit cards. At this rate we will never be out of debt. We've used all of our savings, and we can't get a home equity loan because of our high debt to income ratio.

You need to lower your spending an increase your income. Maybe a second job.

2008-11-12 12:34:08 by rcourson100

Actually it needs to be under 30% total usage.

This is calculated by dividing yout total debt into your total credit, so if you have 5 credit cards with $5,000.00 limits for a total of $25,000.00 with a balance of $7,400.00 your total usage would be 29.6% and you would be fine.

But if you closed 2 of those cards and reduced your total limit to $15,000.00 with the same $7,400.00 balance your now at 49.33% and your credit takes a hit.

You take your first hit at 30%, second at 50% and third at 90%.

2008-07-10 15:43:41 by wantedman

my fiance and i hold a joint credit card account, she is the primary account holder. we are buying a house in the next 1-2 months. the balance on the card is $12,000.

if my name is removed from the account, will that help lower my debt to income ratio? will that negatively affect her interest rate?

You can "remove" your name from the joint account when the balance is back to Zero. The Credit Card Co. will not let you off the hook this easy... they love "joint" accounts because they can go after each of you for the money. The only time you can get out of this is when you no longer owe any money on the card and even then you might end up having to close the account to get your name off it.

Don't open joint accounts... even when you are married.
(Just imagine what you could do to each others credit score if you broke up...).

2009-01-23 20:02:03 by b dub

Hi

I have 2 credit cards. 1 with WellsFargo with 3000 limit and have 1700 debt and USBANK with 4000 limit with 2500 debt. I am a new graduate landed with a descent job. I was wondering if pay off both of my cc debts would be better or pay until both cards are below 30% of card utilization?

Why would you want to keep your cards charged up 30% and pay the banks interest on that each month.

PAY THEM OFF!

www.daveramsey.com

2007-08-12 15:09:38 by Corsica2147