How to Change Your Debt Ratio

Getting hitched involves intertwining your lives, but you have to think beyond the romantic implications. Among the things you now share are assets, income and debt, which makes debt ratio a factor in your life. The debt ratio equation calculates your income and debt to determine how much you owe in relation to your income. A good debt radio is about 20 percent. Changing the debt ratio is a matter of you being aware of how much you owe and paying it down as soon as possible.

Step 1

Write down your total gross monthly income and total monthly debt payments. This includes mortgages and any payments you make for credit cards and loans. Divide the debt payments by your gross monthly income. The resulting number equates to your debt ratio percentage.

Step 2

Pay at least the minimum amount due on your monthly payments. Making consistent monthly payments establishes a history of regular payments and increases your credit score. It also automatically reduces your debt ratio percentage by reducing the total debts owed in comparison to your income.

Step 3

Add a little extra every month to whatever payments you have. Paying only the minimum extends the life of the debt. Paying more than the minimum also reduces the total finance charges and interest paid on the debt. This saves you money and could increase your credit score as you reduce your utilization on credit cards.

Step 4

Avoid using your credit cards or taking on new debts while attempting to change your debt ratio.

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