What is credit?
Credit is borrowed money. It represents the trust a creditor has that you will pay the funds you borrowed. The amount of trust translates directly into the amount of money you receive and the terms for repayment. Credit is a convenient and powerful tool to manage your finances; however, it also involves great responsibility. When mishandled, it could lead to excessive debt. The more you learn about credit and the way to handle it properly, the more likely you are to use it smartly.
How much credit can you afford?
To determine how much credit you can afford, you should look at your debt ratio. Debt ratio is a way of comparing how much you owe versus how much you make. It is recommended that no more than 40% of your monthly income is spent in paying credit cards, loans and mortgages. The lower you keep your debt ratio, the more money you will have for savings and future plans.
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Debt and Credit
