What is a good debt worth?
If your debt ratio does not exceed 30%, the banks will find it excellent. Your ratio shows that if you manage your daily expenses well, you should be able to pay off your debts without worry or penalty. A debt ratio between 30% and 36% is also considered good.
If you're carrying a significant balance, like $20,000 in credit card debt, a rate like that could have even more of a detrimental impact on your finances. The longer the balance goes unpaid, the more the interest charges compound, turning what could have been a manageable debt into a hefty financial burden.
Quick Answer. Good debt is debt that you take on to achieve meaningful growth in your personal life or finances, like a mortgage or student loan. Bad debt is relatively expensive debt and debt that someone takes on for unnecessary expenses, like credit card debt.
Key takeaways
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
Key Takeaways
From a pure risk perspective, debt ratios of 0.4 (40%) or lower are considered better, while a debt ratio of 0.6 (60%) or higher makes it more difficult to borrow money.
“No matter what your income, $100,000 in debt is a very significant amount. The first step to take is to acknowledge it is a problem and that you need to take action now; it's not going to disappear on its own.”
I recently watched a report on CNN that said more than 40 percent of American households have credit card debt of $5,000 to $20,000, and more than 3 percent of U.S. households carry credit card debt of more than $40,000. Average credit card debt per home is more than $8,000.
Personal debt can be considered to be unmanageable when the level of required repayments cannot be met through normal income streams. This would usually occur over a sustained period of time, causing overall debt levels to increase to a level beyond which somebody is able to pay.
They will take out loans to buy companies, improve their operations, and increase their profitability. Once the company is generating more revenue, they either sell it for a profit or continue to collect returns while paying down the debt.
It's calculated by dividing your monthly debts by your gross monthly income. Generally, it's a good idea to keep your DTI ratio below 43%, though 35% or less is considered “good.”
What is a good credit score?
A good FICO score is 670 to 739, according to the company's website. FICO says scores of 580 to 669 are considered "fair" and 740 to 799 are considered "very good." Anything at 800 or above is considered "exceptional." FICO comes from Fair Isaac Corp., the company that first developed a credit scoring system.
Generally, a good debt ratio for a business is around 1 to 1.5. However, the debt-to-equity ratio can vary significantly based on the business's growth stage and industry sector.
The bottom line. Tackling $50,000 in credit card debt is a marathon, not a sprint. That amount of card debt is substantial, especially at today's high rates, and getting rid of it requires patience, discipline and a solid strategy.
Most lenders say a DTI of 36% is acceptable, but they want to lend you money, so they're willing to cut some slack. Many financial advisors say a DTI higher than 35% means you have too much debt. Others stretch the boundaries up to the 49% mark.
Bad debt accrues when money due by a certain date isn't paid. This could be as simple as your client forgetting to pay or, in a more serious case, if they've had to liquidate. However, when debt reaches 90 days, it's increasingly more difficult to collect. Therefore, it's important to stay on top of your receivables.
Good debt is money you borrow for something that has the potential to increase in value or expand your potential income. For example, a mortgage may help you buy a home that can appreciate in value. Student loans may increase your future income by helping you get the job you've wanted.
| Generation | Average Credit Card Debt |
|---|---|
| Millennials (28 to 43 years old) | $6,932 |
| Generation X (44 to 59 years old) | $9,557 |
| Baby Boomers (60 to 78 years old) | $6,754 |
| Silent Generation (79 and older) | $3,428 |
This rule of thumb dictates that you spend no more than 28 percent of your gross monthly income on housing costs, and no more than 36 percent on all of your debt combined, including those housing costs.
Key takeaways
Your debt-to-income (DTI) ratio represents the percentage of income you have left after making monthly debt payments. Your DTI is a key factor in mortgage approval. Most lenders see DTI ratios of 36% or below as ideal.
What is the average credit score? The average FICO credit score in the US is 717, according to the latest FICO data. The average VantageScore is 701 as of February 2025.
What is the average net worth by age?
| Age by decade | Average net worth | Median net worth |
|---|---|---|
| 20s | $113,084 | $7,638 |
| 30s | $317,171 | $35,649 |
| 40s | $791,616 | $125,370 |
| 50s | $1,406,887 | $288,263 |
Filing for Chapter 7 bankruptcy eliminates credit card debt, medical bills and unsecured loans; however, there are some debts that cannot be discharged. Those debts include child support, spousal support obligations, student loans, judgments for damages resulting from drunk driving accidents, and most unpaid taxes.
A hard money loan is a type of loan that is secured by real property. Hard money loans are considered loans of "last resort" or short-term bridge loans.
Debt stress syndrome is the name that doctors have given to a condition where concerns over debt lead to mental, emotional and even physical health problems.
Wealthy family borrows against its assets' growing value and uses the newly available cash to live off or invest in other assets, like rental properties. The family does NOT owe taxes on its asset-leveraged loans because the government doesn't tax borrowed money.
