by Kevin Bradley

Created on: January 13, 2009

The cost of modern living virtually dictates that most people need access to some level of credit. However, with credit card companies and finance companies continually extending credit facilities to borrowers, there is always a question of how much credit is too much.

There is no simple answer to this as personal circumstances will dictate the level of credit available and whether it is too much or if it is sufficient. A more crucial thing to consider is whether it is the right type of credit that is available. The ability to get a great deal on a mortgage is highly preferred over having excessive credit limits on credit cards, as a good mortgage deal will ensure affordable living while excessive credit card limits may lead to impulsive buying or living beyond your means.

It basically comes down to how you manage credit that is available to you. A person who is highly responsible and using credit the right way will always have full control over their finances. This means they will always look to pay off credit card debt before interest becomes payable. It also means the credit card companies will look to increase their line of credit and entice them into buying more expensive items by offering lower interest rates.

For example, if a person has $100,000 available credit but only uses a maximum of $5,000 at any time. If their debt payments are always paid in full on time and they keep a low debt to credit ratio, then it will not matter how much credit is available to them if they continue to manage their money in the same way. It will take a lot of self-control to resist the marketing efforts of credit card companies and finance companies, although it is possible to live without the latest new car or latest plasma television.

Similarly, if a person has $5,000 available credit but is always running their balance close to their credit limit and making only the minimum repayment each month, then it may suggest that $5,000 is enough. If their credit line is extended by $500 and they instantly use up the additional credit, then it should suggest that they have enough credit already and any further credit is only going to trap them into further debt.

The following questions will help you work out whether you are close to the level of credit where you need to exercise self-control or seek professional advice before debt becomes problematic.

1. Do credit card companies regularly increase your credit limit?

If a credit card company regularly increases your credit card limit

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