Credit Card Glossary

Letter Q

Qualifying Ratio

A formula used to determine the likelihood that a loan applicant will be able to payback their loan, whether it be a car, mortgage, or credit card loan -- although the most common use of a qualifying ration comes into play when a consumer applies for a mortgage. The ratio is set up into two groups called a front-end and then a back-end. In short, the front end is the pretax monthly income percentage that is required for the mortgage payment. The back-end is the percentage income required for all of the rest of the individual's expenses. Each lender has their own standards as to what qualifies as a good qualifying ratio.