5 Ways to Improve Debt-to-Income (DTI) Ratio
Debt-to-income (DTI) ratio is one of the factors that determine your overall financial health. As the name implies, it’s the amount of your total monthly debt payments divided by your monthly income. Lenders use your DTI ratio to assess your credit risk. Generally, they view those with higher DTI ratios as riskier since they may have difficulty repaying their debt in case of financial hardship. The ideal DTI ratio depends on lenders’ standards and borrowers’ financial capabilities. But the rule of thumb is: the lower the DTI ratio, the better. Typically, a 35% or less DTI ratio is favorable. If …