you have 3 credit cards: $990.34 (credit limit: $3,500.00), $2,365.78 (credit limit: $4,600.00), and…

you have 3 credit cards: $990.34 (credit limit: $3,500.00), $2,365.78 (credit limit: $4,600.00), and $5,897.65 (credit limit: $8,000.00). you pay off the lowest balance and close the card. what happened to your debt ratio? (1 point) \n○ it increased. \n○ it decreased. \n○ it remained the same. \n○ it improved your credit score.

you have 3 credit cards: $990.34 (credit limit: $3,500.00), $2,365.78 (credit limit: $4,600.00), and $5,897.65 (credit limit: $8,000.00). you pay off the lowest balance and close the card. what happened to your debt ratio? (1 point) \n○ it increased. \n○ it decreased. \n○ it remained the same. \n○ it improved your credit score.

Answer

Explanation:

Step 1: Define Debt Ratio

Debt ratio (credit utilization ratio) is calculated as (\frac{\text{Total Balance}}{\text{Total Credit Limit}}).

Step 2: Calculate Initial Totals

  • Initial total balance: (990.34 + 2365.78 + 5897.65 = 9253.77)
  • Initial total credit limit: (3500 + 4600 + 8000 = 16100)
  • Initial debt ratio: (\frac{9253.77}{16100} \approx 0.5747) (or 57.47%).

Step 3: Calculate After Paying Off Lowest Balance

  • Lowest balance is (990.34), so new total balance: (9253.77 - 990.34 = 8263.43)
  • New total credit limit: (16100 - 3500 = 12600) (since we close the card with limit $3500)
  • New debt ratio: (\frac{8263.43}{12600} \approx 0.6558) (or 65.58%).

Step 4: Compare Ratios

The new debt ratio ((0.6558)) is higher than the initial ratio ((0.5747)), so the debt ratio increased.

Answer:

It increased. (Corresponding to the option "It increased.")