How your credit limit is determined
The maximum credit on your credit card is the maximum amount of credit you are allowed on your card at a given time. The size of the credit line affects the purchasing power of your credit card, i.e. the higher the credit limit, the more you can buy. Once the credit line is reached, the creditor will not allow you to make any additional purchases until you pay off some of your outstanding balance.
There’s another reason to limit your credit: your credit score. The amount of credit you use affects your credit score. 30% of your credit score is a factor called credit usage. This is the ratio of your credit card balance to the credit line. The larger the ratio — which means you use more of your credit limit — the worse it is for your credit score. A low credit limit means that you won’t have much room to make purchases without adversely affecting your credit limit.
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How credit line is determined
If you are planning a large purchase or you are considering the balance transfer, knowing your credit limit in advance will help you decide whether the credit card will be useful. You can skip credit cards with limits that don’t suit your needs, such as a minimum credit card that won’t allow you to transfer a credit or a maximum credit card that you are unlikely to be eligible for.
Unfortunately, it is impossible to predict what your credit limit will be even after approval. Credit card issuers use a variety of factors to set a credit limit for credit cards, and until these factors are considered, they cannot offer you a fixed credit limit.
Factors affecting the credit limit
Credit card type - Think of credit cards as a product with predefined features.
Like interest rates and fees, credit limits are another pre-defined feature. How to determine a credit limit depends on the credit card.
Some credit cards have a specific credit limit, Rs. 20,000 for example, that every approved card holder receives, regardless of other factors. Other credit cards have a credit limit rate and credit cardholders are assigned a credit limit in this range. For example, the possible credit limits for a particular card may be between Rs. 50,000 and Rs. 1,00,000. Most well-qualified applications will be approved for a credit limit at the higher end of the range.
It would be nice if they did, but credit card issuers do not publish credit limits for credit cards. If you’re visiting common credit card review sites, you can find user-provided information about credit limits for different credit cards.
Your income - The amount of money you do generally affects the amount you can pay. While you have a better chance of getting approved for a higher credit limit if you have a high income, there is no guarantee your income will get a high credit limit. Other factors, such as credit card type, still play in play.
Debt to income ratio. Using the information in the credit report and credit card application, the credit card issuer will be able to estimate the debt to income ratio.
This ratio may affect the credit line you receive on your credit card. This means that high income offset by high debt payments can result in a lower credit limit than if you spend less money on monthly debt payments.
Credit record — How you deal with credit limits on other credit cards will not only affect whether you get approved for a new credit card, but also the approved credit line. Late payments, high balances and other negative information make it unlikely that a high credit line will be approved.
Limit other credit cards - Credit card issuers can take their signals from other credit cards you have. If your credit report shows that you have high credit limits on other credit cards, you’ll have a better chance of getting approved for a high credit limit on a new credit card.
On the other hand, if you typically have a Rs. 20000/- limit and a Rs. 50,000/- credit, the Rs. 1 Lakh credit limit is unlikely to be approved immediately.
Co-applicant and credit information. If you are applying in conjunction with someone else, your credit card issuer will consider both your income and credit qualifications to determine your credit limit.
Bank balances and other assets generally do not affect your credit limit, unless you offer money as collateral to secure the line of credit as with a secured credit card.
Knowing the factors used by credit card issuers to set credit limits, you are likely to get a low credit limit if your income is low and you have a high ratio of debt to income, you are just starting out with credit or rebuilding your credit history, or limits on other credit cards Low.
Unique Credit Limit Cases
While most conventional credit cards decide a credit limit, you control your credit limit on a secured credit card. This is because the credit limit on a secured credit card is usually equal to the amount of security you make.
Debit cards and no current spending limit cards
There are two types of credit cards that do not have a fixed credit line: Debit cards and credit cards with no pre-spending limit.
In either case, you do not have a credit limit company that you can spend. Instead, the credit card issuer imposes a sleeping limit that can vary depending on your income, credit history and purchase habits. The difference between these two types of cards is that you expect to pay the full balance on a debit card each month, while it may allow you to pay your balance without any pre-defined credit card to spend.
When “Know Your Credit Limit”
Even determining your credit limit depends entirely on your credit card issuer. You may find your credit limit at the same time you approved it, or you may not learn until you receive your new card in the mail.
This means that you are unable to make any concrete plans to use your credit card until you know precisely what your credit limit is.
Get a higher credit limit
Don’t necessarily get stuck with the credit line you start with. After several months of responsible credit card use, your credit card issuer may automatically raise your credit limit. For the best chance of getting a credit limit automatically increased, use your credit card, don’t maximize it, and pay all or at least most of your bill each month.
Not all credit card issuers automatically increase credit limits. You may have to request an increased credit limit for a larger credit limit. Its simple and very quick to request an increased credit limit — just log into your online account or call your credit card customer service number. You may have to update your income or provide a specific credit line amount you’d like to receive. The credit card issuer will process your request and let you know if your request to increase your credit line has been approved.
If your credit line increase isn’t approved, your credit card issuer will issue an email or a message telling you the reasons you agreed. If your credit score played a factor in the decision, you will get a free copy of the score that was used and two factors that affect your score. If the credit report is used, you’ll get information about requesting a free copy of the credit report used in the decision
