DTI Financial, or the Debt-to-Income ratio, is an important factor in the approval process for bank loans and credit applications. In this guide, we’ll walk you through eight simple steps to help improve your DTI score and make it easier to get approved for the loans and credit cards you need!
1: Understand How DTI Is Calculated.
One of the first steps to improving your DTI score is to understand the formula that’s used to calculate it. DTI is calculated by taking all of your monthly debt commitments – such as credit cards, loans, and other payments and dividing them by your gross monthly income (before taxes). The lower your DTI, the more likely you are to be approved for a loan or credit card.
2: Get A Grip on Your Debt-To-Income Ratio.
To begin lowering your DTI, it’s important to get a good handle on your monthly debts and income. Track all of your expenses and income for several months to get an accurate picture of where you are financial. Knowing exactly how much you’re spending and bringing in each month is critical in understanding your current DTI, as well as identifying where you can make some budget cuts so that you can reduce it.
3: Reduce Your Credit Card Balance.
Credit card debt has a large influence on the DTI ratio. Working to reduce your credit card balance can go a long way in improving your DTI. Make sure to pay more than the minimum required payment each month and avoid taking on any additional debt until you’ve substantially lowered your current balances. It’s also important to pay attention to any changes in credit card interest rates, as well as transfer offers that could help you get out of debt quicker and save money in the long run.
4: Cut Down on Consumer Spending.
If your DTI is high, you may need to make necessary adjustments to your spending and budget. Try cutting back on unnecessary spending to free up more cash for debt repayment. Reducing spending doesn’t mean you have to give up all the activities you enjoy; it just means you need to learn how to better plan and save money so that each of your financial goals can become a reality.
5: Refinance High-Interest Rate Loans and Credit Cards When Possible.
Refinancing your loans and credit cards with a lower interest rate can save you money in the long run. By reducing the interest rates of your loans and/or credit cards, you’ll reduce your monthly payments as well as the total amount that you owe. You can find many refinancing options online- just make sure to read all of the details before signing up for any loan or card.
