Finance Quick Answers
How much debt is too much?
When it comes to credit - it’s important to know when to say when. Ask yourself these questions:
- Do you have the financial capacity to repay the level of debt you are seeking on your credit card or through loans?
- Do you have enough personal assets, such as real estate, stocks or bonds, to act as collateral for the size of the loan you want?
- Do you pay your bills on time and are you living within your means? Creditors want to see a history of timely bill paying and know that you live within your means.
- Have you kept your credit obligations affordable by limiting your total borrowing to less than 20 percent of your after-tax income. You can figure your discretionary spendable income by designing a budget listing your expenses and after-tax income.
Before accepting any new credit cards or asking for a credit limit increase, determine if you can afford it!
Source: "Keeping on top of your credit," USAA newsletter, July/Aug 97.
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Last update: Monday, July 28, 2008