How Important is Your Debt to Limit Ratio?

We are under constant media barrage about checking our credit report and we all know it’s important to have a high credit score. With the new legislation, it’s possible that a great credit score will be more important than ever. But does the average Joe really understand what goes into the calculating of a credit score? I know I didn’t until I started researching it.

I was surprised to find out that your debt to limit ratio has a 30% impact on your credit score. Only your credit history has a higher effect on your credit score as can be researched on sites like

Debt to income ratio is sometimes called debt utilization. Basically, it is the percentag


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10 Responses to How Important is Your Debt to Limit Ratio?

  1. TJ says:

    Are you sure you have your terms correct? “Debt to income ratio” I believe is the amount of money you owe each month (mortgage payments, car payments, etc) vs the amount of money you earn each month. It’s different from “debt utilization” which is what your article is referring to.

  2. M. Beddingfield says:

    Hello TJ, You are correct, I do have one word wrong. It should read Debt to Limit Ratio. I’m sorry for any confusion that this causes. Debt to income is entirely different then what this article is about.
    M. Beddingfield

  3. Andy says:

    M. the term I use is C.U.R. or Credit Utilization Ratio. It’s the ratio of credit used/credit limits. Industry folks tend to use “balance” instead of “debt” because it’s a more accurate description of the short term nature of what’s being measured. FYI, I developed my credit expertise running the business before I started VideoCreditScore.

  4. kiran says:

    I have a question regarding the time of the billing cycle when the balance is considered to be debt. My situation is like this: I had to pay off my grad tuition, so I used my credit card to do so. Having a limit of 1000$, i paid the fees 900 dollars at a time, and immediately paying of the balance on the card as soon as it showed up on my online account(usually in 3 days). So doing this i have ended up with two months wherein my credit usage for a month has been 3500. But at the end of the billing cycle i had a balance payment of 40$ only as I had paid up the rest of it in between. So the question is, what would be considered my debt, 40 (balance at the end of the month)or 3500(total for the month).

    Also to add to the above scenario, if 40$ is taken to be debt, would it be a good idea to pay off the balance every 8 to 10 days or so, to be on the safe side of these companies.


  5. Angela says:

    I’ve been researching credit line increases today, looking for an answer to the same question Kiran has asked. If you find the answer, would you mind posting it? Thank you!

  6. M. Beddingfield says:

    kiran and Angela,
    From what I have read, I believe the debt to income ratio is on your monthly credit card balances. Here a few sites you can read about it and draw you own conclusions.

    Or maybe someone else out there might have a better answer?

  7. kiran says:

    Thanks for the reply Ms Beddingfield. But on reading the links provided by you I still could not get a clear picture as to what would be taken as the debt for a month. Ive asked the same question in the page. If I get an answer from there I will update it here.


  8. kiran says:

    Hey guys,
    I got an answer to my question from the blog
    This is the reply I recieved
    “in your case the amount reported to the credit bureaus as your balance would be $50. However, you will probably be charged interest on the $3650 balance. Most credit cards calculate their interest charges using the

  9. KG says:

    Your debt to limit ratio is also done on an account by account basis. So consolidating debt to one credit card can actually hurt a credit score even though the total utilization has not changed. Most consumers don’t realize this.

  10. Ernie says:

    I don’t think this phrasing is correct – “There are some things you can do to increase your debt to limit ratio. The most obvious is to pay down your debt.”

    Won’t paying down your debt *decrease* your debt to limit ratio, not *increase* it? Did you mean to say “improve” instead of “increase?”


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