Debt-to-income ratio.
In plain English
Your debt-to-income ratio, often shortened to DTI, is the share of your gross monthly income that goes to required debt payments. A lender adds up your monthly obligations, things like rent or mortgage, car loans, student loans, and minimum credit card payments, then divides by your gross (pre-tax) monthly income. The result is a percentage. A lower DTI signals you have more room in your budget to take on and repay a new loan.
01Why it matters
DTI is one of the first numbers a lender checks when you apply for a mortgage, car loan, or credit card. A high ratio can mean a denial or a higher interest rate even when your credit score is good. Knowing your DTI before you apply tells you how a lender is likely to see you, and whether paying down a balance first would help.
02The math, step by step
Suppose your gross pay is $5,000 a month. You pay $1,200 in rent, $300 on a car loan, and $150 in minimum credit card payments, for $1,650 in monthly debt. Divide $1,650 by $5,000 and your DTI is 33 percent. Lenders set their own DTI limits, which vary by loan product, so a lower ratio generally improves both your odds and your rate.
03What this is NOT
Credit utilization is how much of your credit card limits you are using right now. DTI compares your total monthly debt payments to your income. Both affect borrowing, but they measure different things: utilization is about card balances, DTI is about monthly payment burden.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.