Use Credit Wisely

How much credit can you afford?
A rule of thumb to determine how much credit you can take on is to compare how much you owe with how much you earn. This is called your debt-to-income* ratio. The amount you owe, or debt, can include monthly payments of loans such as auto and home loans, and credit cards. Here is a sample calculation:
Your debt-to-income ratio is presented as a percentage. Thus, with the example on the left, you have a debt-to- income ratio of 25%
Generally, a debt-to-income ratio of more than 40% is a signal that you may have too much debt and could be headed for some financial trouble. A high debt-to-income ratio could mean that you can be denied further credit or you will have to pay a higher interest rate if you take on more credit.
* Income refers to your net take-home pay (or your earnings minus taxes and other deductions)