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Debt-to-Income Ratio

Definition: The share of your monthly income that goes to debt payments.

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Debt-to-income ratio is the share of your gross monthly income consumed by required debt payments — loans, cards, financing.

Lenders use it as a capacity test: it answers whether you can absorb another obligation, independently of your credit history. It is also useful personally, because it puts a number on a feeling. A ratio creeping upward while income stays flat is an early warning that shows up long before a missed payment does, which makes it worth checking a couple of times a year rather than only when applying for credit.