My Debt Analysis

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Please enter your annual income in the entry field above to receive your personalized debt analysis.

, these are the factors impacting your debt-to-income analysis

Debt Analysis compares the difference between the monthly income you entered and the monthly amount you spend to maintain your debt (as listed in your credit report or reported by you). This is called a debt to income ratio. Lower debt to income ratios are better because lenders view borrowers with low debt to income ratios as having a better capacity to repay their debts.

You are currently using (XX%) of your monthly income to repay debt. The amount of debt that you carry is considered very low when comparing it to your income. Lenders typically view debt to income ratios less than 20% as Very Good.

A low debt to income ratio along with a good credit standing, which is determined by timely repayment of debt, are both considered very favorable by lenders. Most often, a low debt ratio along with a good credit standing will entitle you to receive the best interest rates and in some cases provide less collateral.

Having a low debt ratio is an indication that you have the ability to handle more debt, if needed. This may be an ideal time to consider making major purchases such as a new home, car, or to make those investments or home improvements you have been considering.

It is important to keep in mind that individual or household capacity for debt can vary significantly. Your lifestyle or stage in life can dramatically influence your ability to carry debt. Based on your current debt ratio, you are probably able to save part of your income each month. If your discretionary spending makes it difficult for you to save each month, you might consider reducing your discretionary spending in order to increase your monthly savings. This may make it easier to repay any additional debt if needed.

Remember that your debt to income ratio is not the only criteria used by lenders to evaluate your creditworthiness. Additional factors include your credit score, and in some instances, any collateral you have to offer to reduce the lender's risk in case of default. These and other personal factors are evaluated according to each lender's policies and preferences.

Debt Analysis compares the difference between the monthly income you entered and the monthly amount you spend to maintain your debt (as listed in your credit report or reported by you). This is called a debt to income ratio. Lower debt to income ratios are better because lenders view borrowers with low debt to income ratios as having a better capacity to repay their debts.

You are currently using (XX%) of your monthly income to repay debt. The amount of debt that you have is considered moderate when comparing it to your income. This level of debt is generally manageable for most people. Lenders generally view debt to income ratios between 20% and 39% as Good.

Lenders will generally view this level of debt satisfactory when qualifying you for a loan. Most often, a debt ratio within this range along with a good credit standing will entitle you to receive the best interest rates and in some cases provide less collateral.

Your debt to income ratio falls into a range between 20% and 39%. If you are at the lower to mid point in the range, you could probably afford to take on additional debt if needed. At the upper end of the range, additional debt may cause you to be over extended.

If you are in the low to mid point of the range, this may be an ideal time to consider making major purchases such as a new home, car, or make those investments or home improvements you have been considering.

If you are at the upper end of this range, additional debt may cause you to become over extended. It is important to keep in mind that individual or household capacity for debt can vary significantly. Your lifestyle or stage in life can dramatically influence your ability to carry debt. In these ranges of debt to income, you are probably able to save a small to substantial part of your income each month. If you are unable to save at this debt level, you need to be willing and able to cut back on discretionary spending. Cutting back on things like recreation, entertainment, vacations etc., would put you in a much better position to save as well as being able to handle additional debt more comfortably.

At the upper end of this range, lenders may look for compensating factors such as a good credit standing, your ability to save, or higher collateral in relation to the loan amount.

Remember that your debt to income ratio is not the only criteria used by lenders to evaluate your creditworthiness. Additional factors include your credit score, and in some instances, any collateral you have to offer to reduce the lender's risk in case of default. These and other personal factors are evaluated according to each lender's policies and preferences.

Debt Analysis compares the difference between the monthly income you entered and the monthly amount you spend to maintain your debt (as listed in your credit report or reported by you). This is called a debt to income ratio. Lower debt to income ratios are better because lenders view borrowers with low debt to income ratios as having a better capacity to repay their debts.

You are currently using (XX%) of your monthly income to repay debt. You may be over extended and should evaluate your financial situation. It may be difficult to make all loan payments on time without sacrificing savings or other discretionary spending on things like recreation , entertainment or vacations. Lenders generally view debt to income ratios between 40% and 55% as Fair.

At the lower end of this debt to income range, you should be able to manage your debt satisfactorily. However, taking on any additional debt could cause you to become over extended and you may be required to pay higher interest rates and/or pledge a greater amount of collateral.

At the higher end of the range between 40% and 55%, lenders will view you as being over extended and would consider giving you a loan to be very risky.

Many lenders will consider compensating factors in evaluating the capacity and credit worthiness of applicants that have high debt to income ratios. Compensating factors such as the following may help you obtain favorable consideration even with a high debt to income ratio:

  • Proven ability to manage a high debt ratio and maintain a satisfactory repayment history with creditors.
  • Proven ability to save and/or have large amount of savings or liquid investments.
  • A debt with only a few payments left.
  • Collateral value that far exceeds the loan amount.

In this debt to income range, it is likely that you will have to reduce debt before you can make any major purchases with new credit. You may want to consider consolidating some or all of your debt into one loan. While this might lower your monthly payments, it will probably extend the amount of time it will take to pay off your current debt, often by several years. Depending on the amount you consolidate, you may be required to pledge collateral such as the equity in your home or other personal assets that you own.

If only a partial debt consolidation is done, the money saved can be used to pay off other debt. You should always pick the accounts with the highest interest rates to pay off first.

Another option would be to divert some of your discretionary spending toward debt repayment. It is recommended that when one account is paid off, you should use the funds from that payment to payoff another account. Once you have some of the debts paid off, it will be easier for you to obtain new credit for major purchases without being considered a high credit risk.

Remember that your debt to income ratio is not the only criteria used by lenders to evaluate your creditworthiness. Additional factors include your credit score, and in some instances, any collateral you have to offer to reduce the lender's risk in case of default. These and other personal factors are evaluated according to each lender's policies and preferences.

Debt Analysis compares the difference between the monthly income you entered and the monthly amount you spend to maintain your debt (as listed in your credit report or reported by you). This is called a debt to income ratio. Lower debt to income ratios are better because lenders view borrowers with low debt to income ratios as having a better capacity to repay their debts.

You are currently using more than 55% of your monthly income to repay debt. Your debt to income ratio is too high and immediate solutions need to be sought out. Lenders generally view debt to income ratios greater than 55% as Poor.

Lenders will view you as a very high credit risk and it is unlikely any new credit can be obtained until your debt to income ratio is reduced. Your after tax income is probably not enough to pay all of your monthly bills on time and cover other living expenses. If your credit rating has not already suffered, it could be damaged unless your situation can be changed quickly. Such high debt ratios are generally the result of either careless spending habits or life events such as loss of income, death in the family, illness or divorce.

You should consider talking to a credit counselor or an attorney that specializes in handling credit issues. Regardless of the reason you have become over extended, credit counselors have the experience in working with creditors and consumers to find and recommend solutions.

If you own your home, and have sufficient equity, a lender may consider offering you a debt consolidation loan secured by the equity in your home. While this may extend the period of time required to pay off your debt, it may free up enough income from both living expenses and meeting your financial obligations.

Another solution is to evaluate the possibilities of temporarily increasing your income through a second job or a full or part time job for another household member. Additional income should be applied to the debt with the highest interest rate first. Once a debt is paid off, apply the money from that payment to the next highest rate account and so on.

Remember that your debt to income ratio is not the only criteria used by lenders to evaluate your creditworthiness. Additional factors include your credit score, and in some instances, any collateral you have to offer to reduce the lender's risk in case of default. These and other personal factors are evaluated according to each lender's policies and preferences.

Frequently Asked Questions (FAQs)

What is a debt-to-income ratio?

Your debt-to-income ratio compares the difference between your monthly income and the monthly amount you spend to maintain your debt. Lenders will often look at this ratio to determine how much additional debt you can handle.

What if my debt-to-income ratio seems too low?

If your debt-to-income ratio looks lower than you expected, you may have entered your yearly income instead of your monthly income. If this is the case, click 'edit' next to 'My Reported Monthly Income:' above and change your income to the monthly amount.

See How Your Debt Affects Your Income and Your Interest Rates

Your debt-to-income ratio is a vital part of your credit health. It illustrates the percentage of your income that you allocate toward paying off your debt each month. Your debt-to-income analysis includes a detailed explanation of how this ratio affects your interest rates, as lenders often use this data in determining how much additional credit to grant you.

Your debt-to-income ratio data is included with your TransUnion Credit Monitoring subscription, as part of your personalized analysis of your credit and debt. Check your progress toward credit health by tracking how your debt-to-income ratio changes over time.

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