To calculate the Credit Debt Ratio (\(R\)):
\[ R = \left( \frac{D}{C} \right) \times 100 \]
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:
\[ R = \left( \frac{5,000}{20,000} \right) \times 100 = 25 \]
The Credit Debt Ratio is 25%.
Let's assume the following values:
Using the formula:
\[ R = \left( \frac{3,000}{15,000} \right) \times 100 = 20 \]
The Credit Debt Ratio is 20%.
