What is a Good Credit Limit?
Key Points About: What a Good Credit Limit Is
Your credit limit is determined by several factors, including your credit history, income, and debts.
Your debt payment history, amounts owed, credit mix, and other factors all make up the calculations for your credit score and, eventually, the credit limit offered to you.
Responsible credit use may result in your lender providing you a larger credit limit.
If your application for a credit card is approved, one of the first pieces of information you’ll receive is your credit card limit, which is the maximum amount of money you can charge. You may be asking yourself, “What is a good credit limit?” Unfortunately, the simple answer is: it’s different for each person.
Credit card limits can vary greatly, sometimes by thousands of dollars. So, if you’re granted a $500 credit limit, is that “bad” compared to a $10,000 limit? Or is a lower limit better? Consider these guidelines to help you understand your credit limit:
How is your credit card limit determined?
There are a variety of factors that can influence your credit limit, including:
- Current income, debts, and your debt-to-income ratio (DTI). Your DTI compares the total amount you owe to what you earn.
- Credit history and credit score.
- History with the creditor you are applying to.
- Creditor’s goals and the current economic environment.
How credit limits affect your credit score
Your credit score is based on a variety of factors and inputs. For example, for your FICO® Score, payment history typically makes up the largest category of the total calculation while amounts owed is still a considerable factor in the FICO® Score calculation1. Other considerations are length of credit history, credit mix (having accounts such as mortgages, loans and credit cards), and new credit (or credit inquiries received from new creditors). In addition, other factors like credit utilization may be taken into consideration, so a high credit limit while carrying a low balance can be beneficial.
Credit limits for secured credit cards
For a secured credit card, your credit limit is based on the amount of your security deposit (up to what the issuer has approved). For example, if you deposit $1,000 on your secured card, your credit limit is $1,000.
Is it good to change to a high limit?
If your credit needs have changed since you first got your card, you can make a case for an increased credit limit by reaching out to your credit card’s customer service department or going to the card issuer’s website to make the request online. Among other criteria a cardholder must meet, the issuer may also consider whether the card has been used responsibly overall, such as the cardholder paying bills on time and avoiding maxing out the card.
So, what’s a good credit limit to have?
In the end, there’s no such thing as a “good” or “bad” credit limit — it depends on the individual account holder’s use of their credit card.
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