I am asked this question alot. I have tried to define an answer for awhile now. I consider anyone that has more than 30% of their take home salary promised out to bills as having to much debt. I understand that we all have a certain level of debt that is needed in todays society. Even your credit score will be hurt if you do not generate a history of payments. Most people do not have less than 30% debt to income. Because of this I have a list of rules to go by that helps clear it up. You don't have any savings. You count on the float in order to pay your bills, writing a check hoping that you'll be able to cover it by the time it clears your bank. You use credit cards for things you used to buy with cash, such as groceries. You're at or near your credit limit on your credit cards. You have more than two or three major credit cards. You've been denied credit. You bounce checks. You're unsure of the total amount you owe on all your debts. You take out cash advances on your credit card to pay other bills. You make minimum payments on your credit cards. If any of these items apply to you this is a sign that you have too much debt and you need to start getting back control of your finances. The best place to start is with your credit cards. Credit cards are usually carry the highest interest rates of any type of loan. The quicker you can get these paid off the better. Next on your list should be personal loans, The only good use for personal loans are if you use them to pay off high interest cards that will place in a stronger financial position and save you money on monthly payments. When you pay off your credit cards do not cancel them if you have the self control to put them away and not use them. By keeping the credit line open you are able score higher on your FICO. The reason for this is that not carrying a balance you are showing creditors a degree of self control. The credit bureaus love this type of control.
next....T.Grimsley
