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What exactly is a debt-to-income ratio and how do lenders use it?

Debt-to-income ratio is the percentage of your income you use to pay your debts. Lenders use your debt-to-income ratio as an indicator of your ability to repay debt and generally regard 35% and below as the most favorable ratio. In other words, it appears that you have a higher likelihood of repaying your debt. The higher your ratio, the more of a credit risk you become. If your debt-to-income ratio is over 36%, you may have trouble finding affordable credit, but often lenders may evaluate other circumstances and may still have loan products appropriate for your finances.
Now that you know more about your debt-to-income ratio, get your credit report & score.
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