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The 4 Critical Factors That Determine Your Credit Card LimitApril 7, 2020
There are two reasons why credit limit holds are important for a credit card user.
Firstly, it’s the maximum amount you can spend using your credit card.
Once you’ve made purchases corresponding to this amount, you’ll need to pay off your balance before you can use your card again.
Secondly, the proportion of credit limit that you’ve used up is what is defined as your credit utilization ratio.
You should keep this ratio as low as possible, as it is an important determinant of your credit score.
The higher the limit of your credit card, the better it is for you.
Not only does a high limit grant better purchasing power, but it also provides scope for a lower utilization ratio.
Unfortunately, when applying for a card, there’s no way to know what your credit limit is likely to be.
This information is revealed to you only when you’ve been approved, or when you have actually received your card.
The factors on which a credit card issuer determines your credit limit are as follows:
1. The type of credit card
Most credit cards have a pre-specified limit.
For example, there are some that provide a limit of, say, $2,000 to all users, while there are other cards that keep the credit limit within a range, for example, between $1,000 - $5,000.
So, depending on your credit profile, you’ll be assigned a limit that’s somewhere between these two figures.
Card issuers do not advertise the credit limits of their card; however, you may find user-submitted information on credit card review sites
2. Credit history
Let’s say you are someone who has a history of high credit card balances and late payments.
In that case, your issuer may not provide you with a high credit limit.
On the other hand, if you handle your other credit cards well, you may be lucky with your current application.
Speaking of existing cards, the credit limits on these cards may also act as a yardstick – don’t expect to be approved for a limit of $5,000 if your other cards have an average limit of say, $1,000.
Generally, the higher your income, the greater your limit is likely to be.
Of course, this is not the only factor that your approved limit depends on.
Your approved limit will also depend on how much debt you have – usually, the higher your debt-to-income ratio, the lower your limit may be.
4. Co-applicant information
If you are applying for a credit card with another person, then the income and credit information of your co-applicant will also be taken into consideration for determining your credit limit.
As mentioned, a high credit limit can prove to be useful as you can use it to make expensive purchases.
But what if none of your credit cards have the kind of limit that you require?
In that case, one of your options is to approach us at Fund&Grow.
Our team utilizes credit card financing to help individuals with good credit obtain $50,000 - $250,000 of unsecured credit at a rate of 0% for a period of 6, 12 or 18 months.
This amount can be used for anything – from providing a down payment on a property to funding a small business.
So, if you are in need of funds, call us at (800) 996-0270 and we will help you out.