To calculate the Credit Debt Ratio (R):
R=(DC)×100
Where:
The credit debt ratio, also known as the credit utilization ratio, is a measure of the amount of credit card debt you have relative to your total available credit. It is expressed as a percentage and is an important factor in determining your credit score. A lower credit debt ratio indicates that you are using a smaller portion of your available credit, which is generally viewed favorably by lenders. Conversely, a higher credit debt ratio suggests that you are using a larger portion of your available credit, which can be a red flag for potential lenders.
Let's assume the following values:
Using the formula:
R=(5,00020,000)×100=25
The Credit Debt Ratio is 25%.
Let's assume the following values:
Using the formula:
R=(3,00015,000)×100=20
The Credit Debt Ratio is 20%.