As simple as it would be to write down a number and say that much is the right amount of credit, it just isn’t that simple. But how much credit is right? Only you can decide that for yourself. You do need to make some analysis of your lifestyle and finances before making that decision.
The number one rule for credit is, never borrow more than you can afford to pay back. Figuring this out is a pretty straightforward process. Take the amount of money that you take home from your job every month, so anything after taxes and other deductions. Now subtract your necessities and things you have to pay. This would be things like your rent or mortgage, food, transportation, utilities. This would also include things that get paid on a quarterly or annual basis. If you want to make sure you have some money put aside for fun stuff, include a set amount for these things now.
Finally, subtract from this amount any existing loan or credit card payments you have currently. This is the amount of disposable income you have every month that could safely go toward paying off more credit. But it isn’t wise to use this entire amount. Emergencies occur and you’ll want to have something extra there to cover the unexpected.
Now that you know how much credit you can afford to have, you should spend it wisely. The safest way to use credit is to pay is off immediately. In the case of a credit card, this would mean using it for things you normally buy anyway and paying it off every month. For a loan, pay a little extra on the payments, if there’s no penalty for doing so. Sometimes this isn’t possible and you will need to carry a balance, but at least you can now be assured that you can responsibly pay it back with no added strain on your finances.