Credit Limit

What is 'Credit Limit'

The amount of credit that a financial institution extends to a client. Credit limit also refers to the maximum amount a credit card company will allow someone to borrow on a single card. Credit limits are usually determined based on information contained in the application of the person seeking credit, or that person's credit rating.

BREAKING DOWN 'Credit Limit'

A borrower's credit limit may be raised after he or she exhibits timely and full repayments. However, having a high credit limit and multiple lines of credit may hurt a person's overall credit rating. In these cases, new potential lenders can see that the applicant has access to a large amount of debt, which may lower the chances that this person will be able to repay his or her debts in the future. As a result, new potential lenders might be less likely to offer an additional source of debt.

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RELATED FAQS
  1. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
  2. How do I get a higher limit on my credit cards?

    Understand how credit limits work with major credit card companies and things you can do to get a higher limit on your credit ... Read Answer >>
  3. What is the difference between available credit and credit limit?

    Explore the difference between available credit and credit limit and the implications different account balances have on ... Read Answer >>
  4. What is the difference between bad credit and no credit?

    The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy ... Read Answer >>
  5. How will accepting a higher credit card limit affect my credit score?

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