Question

Your parents have 3 credit cards. Each has its entire credit line used, and the credit limits are $1,800.00, $2,600.00, and $3,500.00. Paying off and closing which card would increase your parents' debt ratio the most?

Answer 1

Paying off the and closing the lowest credit limit of $1800.00 will increase my parent's debt ratio the most. The debt ratio is computed as debt over the asset. Debt is directly proportional to debt ratio thus, paying off the lowest debt will lead to highest debt and in turn highest debt ratio.

Answer 2

the answer would actually be the debt ratio remains the same

Explanation:

lets say you pay off and close the card with 1,800 it would no longer show on your credit and you will be left with a 100/100 debt ration since the only debt you are in will be including the other two cards 2,600 and 3,500 and they are maxed out same goes if you pay one of the other cards off instead and close it you will be left with a 100/100 debt ratio but if you only pay off a card and not close it then the debt ratio will change because the card will show up but its balance will be 0.00