Financial essentials
Money basics: What your credit score and debt-to-income ratio mean for your future
Two numbers can impact your financial future: Let’s break it down.
Summary
Understanding your credit score and debt-to-income ratio can help you today and in the future.
- Your credit score is a number between 300 and 850 that tells people how likely you are to pay back money you owe, both on time and in full.
- Two important ways to improve your credit score are paying bills on time and not using up all your available credit.
- Your debt-to-income ratio measures how much money you have left each month after paying all your debts. Some lenders look at this number when deciding to loan you money.
- Two ways to improve your debt-to-income ratio are making more money and reducing your overall debt.
Here’s what you need to know about your credit score and debt-to-income ratio
Recent data reveals a new trend: credit scores of Americans in their 20s and early 30s hit a record decline in 2025, falling 39 points lower than the national average.¹ Whether you're part of Gen Z (those born 1997-2012), just starting your career, or simply looking to strengthen your financial foundation, understanding credit and debt is crucial to long-term financial success.
What do these numbers actually mean?
In the United States, your credit score, sometimes called FICO score, ranges from 300 to 850. It’s calculated by credit bureaus using information from lenders about your borrowing and repayment history. Lenders use it to estimate how likely you are to pay back loans.
Credit score ranges2:
- Exceptional: 800-850
- Very good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
Hey, let's talk credit and debt.
Yeah I know, not the most exciting topic, but trust me, this is one of the fastest ways to level up your financial life.
Here's the thing, credit can open doors.
Renting an apartment, getting a car, even landing a job.
But if you don't manage it wisely, it can also trap you in stress and high interest debt.
So let's break down four simple tips to keep your credit game strong.
Tip number one, pay more than the minimum.
Aim to pay more than the minimum and pay in full when you can.
Interest adds up fast.
That $100 purchase?
If you only pay the minimum, it could end up costing you way more.
Tip number two, build an emergency fund.
Life happens.
Build a small emergency fund and a high yield savings account, so you're not reaching for your credit card every time your phone breaks or your car needs repair.
Tip number, three keep credit use low. Try not to max out your card.
Try to keep your credit usage under 30% of your limit.
Low usage equals better credit score equals lower interest rates down the line.
Tip number four, know your rates.
Always check the interest rate before taking on new debt.
Not all credit is bad, but high interest debt, that's the kind you want to avoid.
Bottom line, use credit as a tool, not a crutch.
Make smart moves now and future you will thank you.
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Debt-to-income ratio (DTI): The hidden number that matters
While your credit score gets the spotlight, your DTI ratio quietly influences lending decisions behind the scenes.
What is debt-to-income ratio?
Simply put, it's the percentage of your monthly income that goes toward paying back debt. To calculate your DTI, add up all the required monthly debt payments—student loans, car loans, credit cards, mortgages, etc.—and divide that total by your “gross monthly income” (your earnings before taxes and deductions). The result shows what percentage of your income you’ll need to use to pay back lenders. This percentage is known as your DTI ratio.
Why does DTI matter?
Lenders use your DTI to assess whether you can handle additional debt. While your credit score reflects how reliably you've managed credit in the past, your DTI ratio shows whether you can handle additional debt now. Together, these numbers give lenders a complete picture of your financial health.
Key credit factors you can control
Your credit report is made up of five main credit factors—and the good news is that you have direct control over most of them.
- Payment history (35%) reflects whether you pay your bills on time, making it the single most important factor in your credit score.
- Amounts owed (30%), also called credit “utilization,” measures how much of your available credit you're currently using, with lower percentages being better.
- Length of credit history (15%) reflects how long you've had credit accounts open; longer histories generally improve your score.
- New credit (10%) considers how many new credit accounts you've recently opened and how many hard inquiries appear on your report from applying for credit.
- Credit mix (10%) looks at the variety of credit types you manage, such as credit cards, auto loans, student loans, and mortgages.
Knowing this breakdown can help you focus your efforts and set realistic expectations for improvement.
Two ways to improve your DTI ratio
While your DTI ratio isn't reported to credit bureaus, lenders scrutinize it carefully. You can improve it by:
- Increasing your income through raises, side work, or career advancement.
- Reducing your debt by paying down balances strategically and making on-time payments.
Pro tip: Many lenders prefer a DTI ratio below 36%, with no more than 28% going toward housing costs.
Building your financial future
Improving credit score and debt-to-income ratio isn't just about numbers—it's about unlocking opportunities. Stronger financial health can mean lower interest rates, easier loan approvals, and reduced stress.
Start today by tracking both figures monthly. Set specific, achievable goals and make steady progress. Financial wellness is built gradually, one informed decision at a time.
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1. FICO®,
2. Experian,
This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.