Credit Utilization Ratio Only Affects Revolving Credit

The fact balanced credit ratio only applies to revolving credit like to credit cards which are open ended accounts.  Since you have a fixed credit limit but the balance that you carry on a credit card is under your control the debt utilization ratio is a variable factor that represents your spending and credit handling habits.
In other kinds of credit and loans such as automobile loans or mortgage there is no question of a variable debt utilization ratio.  These kind of loans are closed and that account where the amount of money you are given his fixed along with the monthly payments that you need to make on it.  Since you have no control on the amount of money you pay every month the concept of balance to limit ratio does not apply.

However there is another important factor that is considered by the lenders and that is called the debts to income ratio.  A debt to income ratio is considered by practically all lenders for loans of large amounts such as automobile loans and mortgage.  This ratio compares the total monthly payments that you need to make on all your debts with the monthly income before taxes.  It is an important factor since a lender needs to decide whether you can afford to take on additional debt and whether you will be able to make the payments on it on a little basis not.  Usually the ratio of 35 per cent including a mortgage payment and 20% or less if you’re excluding mortgage is considered to be a good ratio.

The income to debt ratio is not something that is considered during the conclusion of the credit score as your income details are not reported to the credit bureau and are not a part of your credit report.  This is the information that you provide to your lender as a part of his decision-making process.  Just like the balance to limit ratio it is important to keep the debts to income ratio under control to display to the lender that you are managing your finances well and can afford to take on the new loan.

Any installment debt should be treated with seriousness and importance as the credit scores consider the payment history in their calculation.

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