Before the introduction of easy-to-access credit facilities, budgeting was pretty easy, whether you had the money or not. Each large purchase was preceded by an appropriately long period of time required to save sufficient funds. Today, however, consumers are more concerned about available credit than their savings account balance. While credit cards and loans seem to provide an endless source of cash, the truth is that even those with the best credit histories sometimes become victims of overspending and are labeled “overcommitted” by credit reference agencies.

What can cause over-commitment? In very simple terms, over-commitment occurs when lenders believe you have borrowed more than you can safely repay with your existing income. Depending on your credit history, this could be caused by a mortgage and multiple lines of credit, but sometimes even a maxed-out credit card can keep you from borrowing more money. Each case is different and largely depends on three factors: credit history, income, and lines of credit used.

How do you know lenders labeled you overcommitted? Well, the most obvious sign is that you are being denied more credit. As with most financial services, this process is not transparent and leaves banks with a lot of deciding power in this regard. Keep in mind that most lenders have different application criteria and even if you’ve been accepted for a high-interest credit card or other loan, there’s still risk involved. You may be too committed without realizing it. Low income-to-credit ratios may not scare banks because they are taking calculated risk, but can you seriously overcommit yourself? Unless you have a really good payment plan and money management skills, overcommitting is a one way path to massive debt and even bankruptcy.

How to stop overcommitting? It really is very simple, pay off your debts or manage them to lower monthly payments and lessen the burden on your credit score. In the case of simple credit card debt, the best option would be to tighten your belt for a while or get an extra part-time job and pay as much as possible. However, long-term loans may be more difficult to manage. The car loan, for example, although it is theoretically possible to refinance it, turns out to be a fairly static commitment because the vehicles depreciate quickly after the purchase. Mortgages, on the other hand, can be refinanced quite easily as long as the borrower has enough equity to negotiate a better deal with the new lender.

As with debt, overcommitment is best avoided at all costs. De-compromising your credit history can be a long and exhausting process, but it has to be done, so don’t procrastinate, act now.