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Your Cred-O-Meter:
Building Credit Cred: Manage your Debt-to-Credit Ratio

In addition to the DTI, there’s also something called a debt-to-credit ratio. Basically, this ratio calculates the amount you owe as a percentage of the total credit you have available. Put simply, you don’t want to have all of your credit cards maxed out.

Consider this example:  If you have two credit cards with a $500 limit each, your total available credit is $1,000. If you owe $100 on one card and $150 on the other card, then your total debt is $250.

Total debt $100 + $150 = $250
Total credit available $500 + $500 = $1,000
Debt-to-credit ratio $ 250
$1000 = 25%

It’s best to keep your debt-to-credit ratio under 50%.

So a good plan is this: Keep your debts low compared with your income and your available credit. Seems simple enough, right?

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