What is the best debt to income ratio?
A DTI ratio of 35% or less shows you're managing your debt well. This range may increase your chances of getting loans with competitive rates. It also means you likely have money left over for saving and unexpected expenses. If your DTI ratio falls between 36% and 41%, you may still be in good shape.
Your debt-to-income (DTI) ratio represents the percentage of income you have left after making monthly debt payments. Your DTI is a key factor in mortgage approval. Most lenders see DTI ratios of 36% or below as ideal. Approval with a ratio above 50% is tough.
The Federal Reserve tracks the nation's household debt payments as a percentage of disposable income. The most recent debt payment-to-income ratio, from the third quarter of 2024, is 11.3%. That means the average American spends about 11% of their monthly income on debt payments.
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
This rule of thumb dictates that you spend no more than 28 percent of your gross monthly income on housing costs, and no more than 36 percent on all of your debt combined, including those housing costs.
FHA loans are known for being more lenient with credit and DTI requirements. With a good credit score (580 or higher), you might qualify for an FHA loan with a DTI ratio of up to 50%. This makes FHA loans a popular choice for borrowers with good credit but high debt-to-income ratios.
If your monthly income is $2,500, your DTI ratio would be 64 percent, which might be too high to qualify for some credit cards. With an income of roughly $3,700 and the same debt, however, you'd have a DTI ratio of 43 percent and would have better chances of qualifying for a credit card.
A DTI ratio of 35% or less shows you're managing your debt well. This range may increase your chances of getting loans with competitive rates. It also means you likely have money left over for saving and unexpected expenses. If your DTI ratio falls between 36% and 41%, you may still be in good shape.
| Generation | Average Credit Card Debt |
|---|---|
| Millennials (28 to 43 years old) | $6,932 |
| Generation X (44 to 59 years old) | $9,557 |
| Baby Boomers (60 to 78 years old) | $6,754 |
| Silent Generation (79 and older) | $3,428 |
The average salary in the U.S. is $66,622, according to the latest data from the Social Security Administration. How your salary compares will depend on your industry and skilI set, as you'd expect.
What is a good credit score?
Quick Answer. For a score with a range of 300 to 850, a credit score of 670 to 739 is considered good. Credit scores of 740 and above are very good while 800 and higher are excellent. For credit scores that range from 300 to 850, a credit score in the mid to high 600s or above is generally considered good.
One of the most straightforward ways to improve your DTI is by boosting your income. Consider joining the gig economy or freelancing to earn extra cash. This additional income can be directed toward paying off your existing debts more quickly, reducing your overall debt load and improving your DTI ratio.
| Generation | Average total debt (2023) | Average total debt (2022) |
|---|---|---|
| Millenial (27-42) | $125,047 | $115,784 |
| Gen X (43-57) | $157,556 | $154,658 |
| Baby Boomer (58-77) | $94,880 | $96,087 |
| Silent Generation (78+) | $38,600 | $39,345 |
One rule of thumb is that the cost of your home should not exceed three times your income. On a salary of $70k, that would be $210,000. This is only one way to estimate your budget, however, and it assumes that you don't have a lot of other debts.
If you have a $90,000 annual salary, you can generally afford a house price between $300,000 and $350,000. However, this budget also depends on other factors, including your credit score, financial situation and market conditions.
The 28/36 rule
It suggests limiting your mortgage costs to 28% of your gross monthly income and keeping your total debt payments, including your mortgage, car loans, student loans, credit card debt and any other debts, below 36%.
High-income Americans have a median credit score of 774, according to the Federal Reserve Bank of New York Consumer Credit Panel. This is 60 points higher than the national average credit score of 714. It puts the typical high earner in the "very good" credit score range.
50% or more: Take Action - You may have limited funds to save or spend. With more than half your income going toward debt payments, you may not have much money left to save, spend, or handle unforeseen expenses. With this DTI ratio, lenders may limit your borrowing options.
Mortgage lenders want to see a debt-to-income (DTI) ratio of 43% or less. Anything above that could lead to the rejection of your application. The closer your DTI ratio is to that percentage, the less favorable your mortgage terms are likely to be. A Home Purchase Worksheet can help you determine your DTI ratio.
| Card Name | Annual fee | Bankrate review score |
|---|---|---|
| Capital One Platinum Secured Credit Card | $0 | 4.1 |
| Capital One Platinum Credit Card | $0 | 4.2 |
| Capital One Quicksilver Student Cash Rewards Credit Card | $0 | 4.0 |
| Discover it® Student Chrome | $0 | 4.1 |
What is the credit limit for a 30k salary?
Generally, a person with a 30,0000 salary usually gets a credit card with a limit of 50,000 to 1 lakh, depending on the credit score and other factors discussed above. Suppose you think that 50,000 is not enough amount for you and you require a higher amount of card limit for yourself.
A living wage for a single person in California with no children is $27.32 per hour or $56,825 per year, assuming a 40-hour workweek.
A debt ratio between 30% and 36% is also considered good. It's when you're approaching 40% that you have to be very, very vigilant. With a threshold like that, you're a greater risk to lenders. You may already be having trouble making your payments each month.
A General Guide to Which Debt to Pay Off First
Collections: Paying off or settling collection accounts could improve some of your credit scores. Newer credit scoring models ignore paid-off collections accounts. Credit cards: If all your accounts are current, shift your focus to paying down credit card balances.
Government-backed loans in particular can make it possible for those with a high debt-to-income ratio to qualify. Explore the following options: FHA Loans: FHA loans for first-time home buyers allow DTIs as high as 50% in some cases, even with less-than-perfect credit.
