More For Your Money - University of Illinois Extension

Find Out Your Debt Rate

A common guideline is to limit credit use (other than mortgage or rental payments) to 15 percent of take-home pay. While this may serve as a rough guideline for some people, it may not be useful to others. Spending habits and economic situations influence how much credit a person can afford.


Divide your total monthly debt payment by your monthly take-home pay.

What is your total monthly debt payment?
What is your monthly take-home pay? $
What is your debt rate?

For example:  If your monthly take-home pay is $1100 and total monthly debt payment is $132, then your debt rate is 12%

$132 ÷ $1100 = $0.12
0.12 X 100 = 12%

Now, compare your debt rate to the chart. Do you have too much credit debt?

How Are You Doing?

Do you have too much credit debt?
10 percent
Congratulations! Like 85% of all American families you limit the amount of debt you carry on your credit cards.
11 to 15 percent
You are in the high average group.  Don’t be too alarmed but you should slow down and try to get your debt closer to 10%.
16 to 20 percent
You have more debt than most people with your income.  Only five out of 100 people owe as much as you do.  Start working on reducing your debt.
21 to 25 percent
RED ALERT!  Your home, your car, and your debt are probably eating up 75% of your paycheck.  It’s time for a dramatic change.  You may need help from the National Foundation for Credit Counseling (1-800-388-2227) or
26 percent or more
You definitely have far more credit than you can handle.  You need professional help immediately to reduce your debt.  Start by calling one of the above.

Taken from: Out of Hoc: A Practical Guide for Eliminating Your Credit Card & Personal Debt, Dahlstrom & Company, 1993.