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Regular Contributor
bsal
Posts: 157
Registered: ‎04-13-2008

WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

I have a question and I wanted to know if anybody out there can help me with this; first off what does debt to credit ratio mean and what if your debt to credit ratio is 94% is that a good thing or a bad thing can somebody advise me on this quesiton please

 

thank you

Super Contributor
marty56
Posts: 5,679
Registered: ‎10-06-2007

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

It is the total you owe on yiur credit cards divied by the total credit limit.  If you have one credit card with a $1000 limit and you owe $940 on it, your ratio is 94% which is maxed out.

 

You ratio should be no more than 9%.  At 84%, you could be loosing over 100 points on your credit score.

 

Also know as %util

09/12/2013 FICO: EQ: 772 EX:813 TU:752
Regular Contributor
bsal
Posts: 157
Registered: ‎04-13-2008

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

First of all marty I want to thank you so very much for helping me with that question, well maybe you can help me on this next question. I just ran my free credit report with equfiax didnt tell me my score but it showed me whats on my equifax file, now I have a installment school loan that i have been paying on , its saying the bal on it is 2,475.00 thats the reason its saying my debt to credit ratio is 94% but the real bal on my loan is bout 1,200.00 how do i get them to update this installment loan so it will tell my real bal and knock down that % ?

Valued Contributor
debtisgood
Posts: 1,126
Registered: ‎03-25-2008

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

bsal,

 

Is that the only credit on your report. Credit cards with balances (whether open or closed) could get you to the 94% figure.

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Community Leader
Epic Contributor
haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

There is installment util (as on mortgages, car loans, student loans, home equity loans, personal loans) and revolving util (credit cards, lines of credit, smaller home equity lines of credit.)

Installment util is not a big deal in your FICO scores, but revolving util is. If you have both loans and credit cards with balances, your best move is to pay down the CC's, depending on current util, APR's, and whether you're looking at financial benefits or credit benefits.

Generally, installment and revolving util report separately, although you never know with sources like free credit report dot com and so forth.

Do realize that the only scores that count, and the only advice that matters, are from FICO. You can buy your EQ FICO directly from them, and your TU FICO with some difficulty from transunioncs.com (not the straight TransUnion site), but it's generally easiest to buy them here off the site. Be sure to first google fico discount cope coupon to get at least 15% off.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Regular Contributor
bsal
Posts: 157
Registered: ‎04-13-2008

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

THANK YOU GUYS FOR ALL YOUR HELP ON THIS QUESTION, BUT TO ANSWER YO QUESTION, YES THAT IS THE ONLY THING SHOWING ON MY CREDIT REPORT IS THAT INSTALLMENT LOAN THAT I HAVE BEEN PAYING GREAT ONTIME, AND SINCE YALL SAYING MY DEBT TO RATIO 94% IS NOT GOOD I'M TRYIN TO KNOCK THAT DOWN, I HAVE NO CREDIT CARDS, MY SITUATION IS I'M REALLY TRYIN TO GET A NEW CAR IN A COUPLE OF MONTHS AND I WOULD LIKE A DECENT INTREST RATE, WHAT DO YOU GUYS AND GALS THINK MY CHANCES ARE, I HAVE NO NEG MARKS ON MY EQUIFAX REPORT AT ALL. WHAT DO U GUYS THINK MY CHANCES ARE ON A DECENT INTREST RATE?
Valued Contributor
debtisgood
Posts: 1,126
Registered: ‎03-25-2008

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

How long is your credit history? Did you have anything else open before that installment loan?

 

Auto lenders don't require super high scores but they are big on seeing a couple accounts with a few years of positive history.

Regular Contributor
bsal
Posts: 157
Registered: ‎04-13-2008

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

well debt my credit history on my installment loan says its 8 years old, and i dont have any other credit history on as far as revolving credit, all i have is that school installment loan that i hever been late on, but i dont have any neg mars either , i'm afraid if i apply for a credit card i'm going to the hit from the inquary plus get the rejected cause i dont have anything else on my report but that school loan; I really want to get this car tho with a decent intrest rate i been workin so hard to clean up the neg on my credit but i'm afraid i might get rejected from applyiin for a credit card and that i wont get a good intrest rate on this car, whats yo theory on this guys?
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Community Leader
Epic Contributor
haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

I wouldn't worry about the reported util on a loan, as long as it has a positive history of timely payments. Lenders do want to make sure that you have enough disposable income to easily make monthly payments, and they will compare your required minimum payments to your income, so that's something to be aware of.Obviously, if it makes sense for financial reasons, go ahead and accelerate your payments, but I don't imagine it will do anything special for scores.

I have no idea how a lender will view such a skimpy history, but you will generally do better in terms of rates to get pre-approved financing from a local credit union, rather than go with dealer financing.

For long-term FICO scoring health, you really ought to pick up 2 or 3 credit cards. Even if you only use them enough to keep them alive, and them pay them off immediately online as if they were debit cards (the best way to treat CC's, IMO), that will help establish a credit profile as someone who uses credit in a restrained and responsible manner, and who can be trusted with more credit when the time comes (think mortgage.)

If you do go visit credit unions to ask about auto financing, you might also ask about getting a CC to get you started. Even a secured card is fine (put $1000 into a special account and get a CC with a credit limit of $1000.) That will get you started. For other ideas, read the Credit Cards board, although try not to get too freaked out at some of the more banzai members there. :smileywink:


--oh, btw, would you mind not posting in ALL CAPS? It's hard to read, and most people reading posts in all caps feel as if they're being shouted at. (common e-mail and forum rule of thumb/ etiquette)

thanks!
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Regular Contributor
bsal
Posts: 157
Registered: ‎04-13-2008

Re: WHAT DOES DEBT TO CREDIT RATIO MEAN ANYBODY?

sorry for typing in all caps , but thank you so much for that info, i was thinkin of going with a credit union anyway pentagon federal credit union to be exact, but so your saying with my current student loan installment being 94% debt to ratio i shouldnt worry bout tryin to pay big chunks of payments at a time to knock down my %? because thats what i was thinkin bout doing because my school loan is only 2,747.00 dollars and i was going to start paying 500.00 at a time along with my 60 dollars a month they automactacly take out. Are you saying i shouldnt have to worry about paying it off in big chunks? and what intrest rate do you guys think i would get on a used car with my skimpy credit report since the school loan is the only thing on my equifax report that i have been payin on time, ? any ideas?

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