How Much Debt is Too Much Debt?

We live in a world that looks at our credit scores before our names. That three digit number carries more weight when determining our viability than anything else in our lives. From job hunting to purchasing the most basic of items, if your credit sc credit cards ore is low you can be sure you will pay a heavy price. How do we keep that score high? How do we know how much debt is too much debt?

It can be very confusing for the average person determining how best to handle debt. If you have no debt then your credit score will be impacted negatively because you have not demonstrated your ability to handle debt. If you have too much debt you instantly become high risk. Where is that happy medium?

People have forgotten that one of the major considerations in how much debt you should have has to be how much you can afford to repay! Somehow in our attempt to establish credit and build our credit scores we have forgotten to focus on our ability to repay that debt. Our incomes and our savings have to be considered prior to accepting and using credit.

We need to realize that just because the major credit company sent me a credit card with $10,000 available to me, which does not mean I need to rush out and spend $10,000! Actually when determining your credit score, this is a major factor! Your amount of approved credit compared to your actual amount of debt weighs heavily on your score. They want to see that you are acting responsibly and not over extending yourself. They actually expect you to know that you do not need to spend every dime of available credit when you can’t afford to repay it.

Far too many people forget about the interest and finance charges that get added to their balances. Even if you have an available credit line of $1,000 and you go out and spend $800 of it, guess what? You have exceeded your credit limit because of the interest that will continue to accrue on your balance. Understanding your budget and acting responsible is paramount when it comes to debt.

Use credit cards sparingly! They should be for emergency purposes only, not for extravagant and completely unnecessary purchases. Credit is not meant to destroy your financial future, however due to the need for instant gratification that is exactly what it is doing to millions. Actually, millions are doing it to themselves! Ignoring common sense and spending beyond your means is no one’s fault but your own.

How much debt is too much debt? That should have an easy answer. Any debt that is unnecessary, frivolous and based upon instant gratification is too much! Establish your credit by using your credit card wisely and paying it on time! Your credit score will reflect your ability to manage your debt and your restraint from taking advantage when you can’t afford to. Allow common sense to do its job! Think before you buy!