What percentage of your take-home pay is considered good to keep your credit charges at?

Keeping your credit charges to about 20% of your take-home pay is considered a prudent guideline for managing debt responsibly. This percentage balances maintaining a healthy credit utilization ratio while also allowing room for necessary expenses and savings.

Credit utilization refers to the percentage of your available credit that you are using, and lenders generally view a lower utilization ratio more favorably. When credit charges exceed this 20% threshold, it may indicate that an individual is relying too heavily on credit, which can negatively impact credit scores and financial stability.

Additionally, maintaining credit charges within this range helps ensure you will not struggle with repayment, as your monthly obligations remain manageable. This approach can contribute to better financial health, helping to build a strong credit history and enabling individuals to qualify for loans at favorable terms in the future.