Debt Watch answers two questions about your debt: can you carry it, and how well are you managing credit? Four ratios feed it. Each gets graded against a published benchmark, then they’re rolled into one number you can track.
Say a car payment, a student loan, and a Visa minimum all come out of the same paycheck every month. Is that fine, or a problem? That’s the question Debt Watch puts a number on. Below: all four ratios, the exact bands, and why lower wins every time.
Debt Watch is one of the frameworks feeding your overall financial health score. That post covers the blend. This one opens up the debt math underneath.
The two pillars Debt Watch measures
Cram everything into one figure and it hides too much. So Debt Watch splits your debt into two pillars. Burden is the first: how much of your income your debt payments have already claimed before you decide anything else. Discipline is the second. It looks at how you handle revolving credit and how much of what you owe is the expensive kind.
Burden weighs more, and for good reason. Buried in required payments is a tighter spot than a modest balance at a decent rate. Discipline still counts, though, and one nasty high-rate balance can drag the whole score down by itself.
One rule runs through every metric. Owing nothing is a good result, not a missing one, so a debt-free household scores at the top of each ratio instead of showing up as incomplete. We only flag a ratio as unfinished when a real number is absent (say, a loan with no minimum payment entered). Otherwise we’d be calling you excellent based on an empty field.
Debt-to-income: can you carry the payments?
Debt-to-income is the anchor of the burden pillar. Take the required monthly payment on every debt you carry (mortgage, car loan, the minimums on your cards) and divide the total by your gross monthly income.
The bands:
- 20% or below scores at the top. Plenty of breathing room.
- 36% is the benchmark. It’s the back-end half of the 28/36 rule lenders have used for decades to size a loan.
- 43% and up needs attention. The federal Qualified Mortgage rule caps most qualifying loans there, so we treat it as the point where a budget starts to creak.
Why gross and not take-home? Because that’s what lenders use when they size up what you can handle. A debt with no minimum payment on file counts as zero toward the total. So if a blank field is the only thing making your ratio look perfect, Debt Watch asks you to fill it in. No free points.
Housing ratio: how much goes to the roof?
The housing ratio is the front-end version of the same idea. Same division, narrower top line: only what it costs to own your home, meaning the mortgage plus any home equity line of credit, over gross monthly income.
Best at 20% or below. Benchmark at 28%. Flagged at 43% or higher. That 28% is the front half of the same 28/36 rule: housing near 28% of gross income, all debt near 36%. Rent isn’t in scope yet, so for now this ratio is for owners. Renting? Your housing cost still lands in your fixed-cost ratio, which measures committed spending from another angle.
Credit utilization: the balance you actually carry
Utilization kicks off the discipline pillar, and it’s the metric people most often get dinged on unfairly elsewhere. Debt Watch scores the balance you carry from month to month, not your full statement balance.
Picture someone who puts groceries, gas, and a $1,800 flight on one card for the points, then clears it in full every month. They carry nothing. They pay zero interest. They should score near the top, however scary the statement looked. Charging a lot and owing a lot are different things.
The bands run against your total revolving limits:
- 10% or below scores at the top. Your cards are mostly idle.
- 30% is the benchmark. Solid, not stellar.
- 80% and up needs attention. You’re close to tapped out.
We can’t always tell carried balance from statement balance yet. When we can’t, Debt Watch falls back to your revolving balance and softens the penalty, so a payment that posts a day after the statement closes can’t sink the score on its own. And a carried balance with no credit limit on file has nothing to divide by. We ask for the limit rather than guess.
High-interest debt: the load that costs the most
Last one, and it’s blunt. How much of your income is tied up in expensive debt? Debt Watch takes every debt at 8% APR or higher, adds up the balances, and holds them against your gross annual income.
Zero is best, 10% is the benchmark, and 50% or more gets flagged. These are the balances worth attacking first, so they get their own line instead of disappearing into the total. Carrying some? Our loan and debt payoff tracker helps you plan the order to knock them out.
A debt with no APR on file is left out of this count, not assumed cheap. If your load reads 0% only because the rates are blank, that’s not a clean bill of health. Debt Watch marks it unfinished and points you at the debts still missing a rate.
How the four scores come together
Think of each ratio as its own little ramp. Hit the stretch target, full marks. Sit at the benchmark, a solid score. Cross the needs-attention line and it bottoms out at zero, sliding smoothly in between. Debt Watch then blends the four into the debt score you see, with burden weighted more heavily than discipline.
Keeping the pillars apart means a weak spot stays visible instead of averaging away. Good income plus one maxed-out Mastercard? Utilization still gets flagged. And when the score moves, Debt Watch tells you which ratio moved it. That’s why we score four things, not one.
Frequently asked questions
What is a good debt-to-income ratio?
20% of gross monthly income or less gets the best score in Debt Watch. 36% is the benchmark most lenders go by, and 43% or higher is flagged as needing attention. That 43% line comes from the federal Qualified Mortgage rule, which caps most qualifying mortgages there. Lower always wins, and no debt payments at all scores at the top.
Does credit utilization use my statement balance?
Nope. Debt Watch scores the balance you actually carry month to month. Pay your cards off in full and you land near the top even with a huge statement, since carrying nothing means paying no interest. If we can’t yet separate carried from statement balance, we use the revolving balance and soften the penalty, so a statement-timing fluke can’t tank your score on its own.
What counts as high-interest debt?
Anything at 8% APR or higher. Debt Watch totals those balances and compares them with your gross annual income. A debt with no APR on file gets left out rather than assumed clean, and we ask you to add the rate instead of scoring around the gap.
Do I need to link a bank for Debt Watch to work?
No. Debt Watch works from whatever debts, balances, and payments you already track in Skwad, whether they came from bank links, forwarded emails, receipt scans, or typing them in. Add a minimum payment, credit limit, or APR and the matching ratio updates.
See your own debt score
Debt Watch won’t pay anything off for you. It takes that low-grade 3 a.m. worry and turns it into four numbers, points at the one dragging, and shows where your next extra payment would do the most good. Open Sight in Skwad to see your debt score and the ratios behind it. The Consumer Financial Protection Bureau’s guide to building and sticking to a budget is a solid primary source for the habits that move these ratios the right way.
