Calculate Your Debt-to-Income Ratio | Wells Fargo (2024)

In addition to your credit score, your debt-to-income (DTI) ratio is an important part of your overall financial health. Calculating your DTI may help you determine how comfortable you are with your current debt, and also decide whether applying for credit is the right choice for you.

When you apply for credit, lenders evaluate your DTI to help determine the risk associated with you taking on another payment. Use the information below to calculate your own debt-to-income ratio and understand what it means to lenders.

How to calculate your debt-to-income ratio

Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it’s the percentage of your gross monthly income (before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt. To calculate your debt-to-income ratio:

Step 1:Calculate Your Debt-to-Income Ratio | Wells Fargo (1)

Add up your monthly bills which may include:

  • Monthly rent or house payment
  • Monthly alimony or child support payments
  • Student, auto, and other monthly loan payments
  • Credit card monthly payments (use the minimum payment)
  • Other debts

Note: Expenses like groceries, utilities, gas, and your taxes generally are not included. See the FAQs for more information.

Step 2:

Divide the total by your gross monthly income, which is your income before taxes.

Step 3:

The result is your DTI, which will be in the form of a percentage. The lower the DTI, the less risky you are to lenders. For more information, see Understand what your ratio means.

Calculate Your Debt-to-Income Ratio | Wells Fargo (2)

Use our calculator to check your debt-to-income ratio


Get Started

This calculator is for educational purposes only and is not a denial or approval of credit.
When you apply for credit, your lender may calculate your debt-to-income (DTI) ratio based on verified income and debt amounts, and the result may differ from the one shown here.
You do not need to share alimony, child support, or separate maintenance income unless you want it considered when calculating your result.
If you receive income that is nontaxable, it may be upwardly adjusted to account for the nontaxable status.

QSR-0323-01074

LRC-0223

Calculate Your Debt-to-Income Ratio | Wells Fargo (2024)

FAQs

Calculate Your Debt-to-Income Ratio | Wells Fargo? ›

To calculate your DTI, you add up all your monthly debt payments and divide them by your gross monthly income.

Can I calculate my debt-to-income ratio? ›

To calculate your DTI, you add up all your monthly debt payments and divide them by your gross monthly income.

Is 12% a good debt-to-income ratio? ›

It's calculated by dividing your monthly debts by your gross monthly income. Generally, it's a good idea to keep your DTI ratio below 43%, though 35% or less is considered “good.”

What is a good debt-to-income ratio for banks? ›

Your particular ratio in addition to your overall monthly income and debt, and credit rating are weighed when you apply for a new credit account. Standards and guidelines vary, most lenders like to see a DTI below 35─36% but some mortgage lenders allow up to 43─45% DTI, with some FHA-insured loans allowing a 50% DTI.

What is a good DTI ratio? ›

Debt-to-income ratio of 36% or less

With a DTI ratio of 36% or less, you probably have a healthy amount of income each month to put towards investments or savings. Most lenders will see you as a safe bet to afford monthly payments for a new loan or line of credit.

How to find debt-to-income ratio on credit karma? ›

How to calculate your debt-to-income ratio. To calculate your DTI, add up the total of all of your monthly debt payments and divide this amount by your gross monthly income, which is typically the amount of money you make before taxes and other deductions each month.

Does debt-to-income ratio affect loan? ›

A good rule of thumb is to keep the debt-to-income ratio below 36 percent. This will increase your chances of getting a loan.

How to lower debt-to-income ratio quickly? ›

Pay Down Debt

Paying down debt is the most straightforward way to reduce your DTI. The fewer debts you owe, the lower your debt-to-income ratio will be. Suppose that you have a car loan with a monthly payment of $500. You can begin paying an extra $250 toward the principal each month to pay off the vehicle sooner.

Is a debt ratio of 75% bad? ›

Interpreting the Debt Ratio

If the ratio is over 1, a company has more debt than assets. If the ratio is below 1, the company has more assets than debt. Broadly speaking, ratios of 60% (0.6) or more are considered high, while ratios of 40% (0.4) or less are considered low.

What is the 28/36 rule? ›

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

Is a 50% debt-to-income ratio good? ›

As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28%–35% of that debt going toward servicing a mortgage. 1 The maximum DTI ratio varies from lender to lender.

Is a 7% debt-to-income ratio good? ›

DTI is one factor that can help lenders decide whether you can repay the money you have borrowed or take on more debt. A good debt-to-income ratio is below 43%, and many lenders prefer 36% or below. Learn more about how debt-to-income ratio is calculated and how you can improve yours.

Which on-time payment will actually improve your credit score? ›

Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.

Is 21 debt-to-income ratio good? ›

11% to 20%: Again, shouldn't have trouble getting loans. Time to scale back on spending. 21% to 35%: Although you may not have trouble getting new credit cards, you are spending too much of your monthly income on debt repayment. 36% to 50%: You may still qualify for certain loans, however it will be at higher rates.

Does DTI affect credit score? ›

Your DTI ratio refers to the total amount of debt you carry each month compared to your total monthly income. Your DTI ratio doesn't directly impact your credit score, but it's one factor lenders may consider when deciding whether to approve you for an additional credit account.

Is 13% a good debt-to-income ratio? ›

35% or less: Looking Good - Relative to your income, your debt is at a manageable level.

Is a 10% debt-to-income ratio good? ›

35% or less is generally viewed as favorable, and your debt is manageable. You likely have money remaining after paying monthly bills. 36% to 49% means your DTI ratio is adequate, but you have room for improvement. Lenders might ask for other eligibility requirements.

Is 11% debt-to-income ratio good? ›

11% to 20%: Again, shouldn't have trouble getting loans. Time to scale back on spending. 21% to 35%: Although you may not have trouble getting new credit cards, you are spending too much of your monthly income on debt repayment. 36% to 50%: You may still qualify for certain loans, however it will be at higher rates.

Is 14 a good debt-to-income ratio? ›

Debt-to-income (DTI) ratio is an immediate snapshot of your creditworthiness. It measures your monthly recurring debt (including loans, credit card payments, and rent or mortgage payments) in relation to your gross income. Lenders typically want to see a DTI of 35% to 40% or less.

Top Articles
Latest Posts
Article information

Author: Greg Kuvalis

Last Updated:

Views: 5666

Rating: 4.4 / 5 (75 voted)

Reviews: 82% of readers found this page helpful

Author information

Name: Greg Kuvalis

Birthday: 1996-12-20

Address: 53157 Trantow Inlet, Townemouth, FL 92564-0267

Phone: +68218650356656

Job: IT Representative

Hobby: Knitting, Amateur radio, Skiing, Running, Mountain biking, Slacklining, Electronics

Introduction: My name is Greg Kuvalis, I am a witty, spotless, beautiful, charming, delightful, thankful, beautiful person who loves writing and wants to share my knowledge and understanding with you.