Credit Limits and How They’re Determined

When you apply for a credit card, once you are approved you will be notified with what your credit limit is for that card. The issuer of the credit card decides how high or low the credit limit will be, and the credit limit is based on several different variables that the issuer will look into. It is important to pay attention to what your credit limit is, as the higher and closer you get to your limit, the more it will ultimately hurt your score as you have less available credit. Here are some different variables that the issuer will look into when deciding your credit limit:

• First and foremost, the issuer will look at your employment status to ensure that you are employed. Whether you are employed affects whether the issuer feels that you will be able to successfully pay off your balance each month.
• Your income. Next, the issuer will take a look at your income to gauge how much your credit limit should be. Your income will definitely make a difference as to how much of a credit limit you have, because it showcases how much you will feasibly be able to pay off.
• Credit history. The issuer will 100% take into consideration your credit history and how you have paid off credit cards in the past. They will look into whether you have had high or low credits before, what you generally keep your card balances at and how often you have had late payments.

While there are many other types of variables an issuer will look into, these are some of the top items that you should keep in mind when applying for a new card and new credit limit.