What is a Good Debt-to-Income Ratio?

Like understanding your credit score, getting to know your debt-to-income (DTI) ratio is an important part of managing your overall financial picture. More than 40% of Americans are looking for ways overcome debt, according to the 2024 Wells Fargo Money Study, and understanding your DTI ratio can help you make informed decisions about managing debt and applying for new credit.

Calculating your DTI ratio can help you assess your comfort level with your current debt and decide if taking on more credit is a wise choice. When you apply for credit, lenders will look at your DTI ratio to evaluate the risk of extending credit to you.

Our standards for Debt-to-Income (DTI) ratio

Once you’ve calculated your DTI ratio, you’ll want to understand how lenders review it when they’re considering your application. Take a look at the guidelines we use:

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

You most likely have money left over for saving or spending after you’ve paid your bills. Lenders generally view a lower DTI as favorable.

36% to 49%: Opportunity to improve

You’re managing your debt adequately, but you may want to consider lowering your DTI. This could put you in a better position to handle unforeseen expenses. If you’re looking to borrow, keep in mind that lenders may ask for additional eligibility criteria.

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.