Correlation between loan and credit to debt ratio?

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How does any loan affect my credit to debt ratio? Here is my specific situation, I have credit card available line of 10,000. I owe 2,000. However, I have a student loan of 8,000. Does this mean my credit to debt ratio is 10000/18000?

Correlation between loan and credit to debt ratio?

No, only your revolving lines of credit (credit card debt) factor into your credit score that way. So your debt to available credit ratio would be 2000/10000. That is actually a good level to have. You don't want to have your credit card debt over 25% of your available credit or it will hurt your credit score.

Your student loan is considered an installment loan. It will help your credit score as long as you make all your payments on time. If you are applying for a major loan such as getting a mortgage, it would be a good idea to have your student loan paid off beforehand.

Edit: To answer your later question - having a student loan would raise your credit score as you would have a tradeline with on time payments. Also, one of the factors in calculating your credit score is having a healthy balance between having installment loans and revolving lines of credit (credit cards). As far as exactly how many points it will raise your credit score, I don't have an answer for that.

So, overall having a student loan with a balance would help you get a loan due to the fact you have a history of making on-time payments. However, with having an obligation to make the student loan payments, you don't have as much income to use toward a mortgage.

Don't let this discourage you - many people have more than one credit card bill plus a car payment when applying for a mortgage. If all you have is a student loan and one credit card payment, you'll probably be in better shape than most people.

Correlation between loan and credit to debt ratio?

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