Credit limits are meant to reflect how much money an issuer thinks cardholders can spend responsibly. To determine that number, issuers look at everything from past payment history, to income, to credit utilization, to how much an applicant pays for their rent or mortgage.
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Your credit score, though, is typically the single most important figure considered when determining the credit limit and it’s more or less an aggregate of the above figures, minus income. But a high score alone does not necessarily guarantee a certain credit limit or even card approval.
Each issuer has its own criteria for determining credit limits and may weigh individual components of your credit profile uniquely. The best way to increase your odds of a high credit limit is to make sure all the components that affect your credit score are in good standing.
Your payment history — which accounts for a significant percentage in credit scoring models — is an important measure of your creditworthiness. The thinking is, if a cardholder has paid their bills on time in the past, odds are they’ll do so in the future.
If you’ve never missed a payment in over twenty years of credit card use, in the eyes of the credit card companies you’re probably lower of a non-payment threat. Ensuring you always make your credit card payments on time is one of the best long-term paths to a higher credit limit.
Credit utilization refers to the amount of a person’s credit in use compared to their total credit available. A lower credit utilization — less relative credit in use — will generally be better for card approval and credit limit determination.
Credit card issuers may look at both overall credit utilization and utilization on individual lines of credit when determining the size of a credit limit on a new account. If you plan on applying for a new card in a few months, paying down some existing balances could help raise your credit limit.
Length of Credit History
Having a longer credit history gives issuers a larger pool of data to predict how you’re going to use credit moving forward, and will generally help improve your odds of a higher limit — so long as your past credit history is positive.
Again, if you’ve never missed a payment in over twenty years of credit use, that’s going to help your chances of approval with a higher credit limit. If your credit history is shorter, it’s harder for issuers to predict how you’ll use a large line of credit and they’ll likely start you off with something lower.
Personal Income and Monthly Expenses
Applicant salaries and housing costs are also used as proxies to help determine credit limits. If an individual has a high salary with a relatively low rent or mortgage, odds are they have more discretionary income and thus may qualify for a higher spending limit.
A person who’s applied for a handful of credit cards — or other lines of credit — in a short period of time may be viewed as a risk for issuers and could receive a lower credit limit. Although there are no specific guidelines on how to stagger credit applications, it’s generally wise to spread them out over time to help prevent issuer concern.
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If you don’t receive your ideal credit limit right after applying for a card, don’t fret. Many issuers have been known to increase credit limits on their own over time. And if you’ve used a card for a while without any missed payments or other negative activity, you can request an increase yourself.