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 can afford to pay what you owe.
? Have you kept your credit obligations affordable by limiting your total monthly consumer debt (e.g., credit cards and loans) payments to less than 20 percent of your monthly 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!
We would like your feedback on this Personal Finance Frequently Asked Question.
