Credit Limit

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DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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. How do I get a higher limit on my credit cards?

    Before applying for a higher credit limit, it is important to demonstrate responsibility. One way to do this is by making ... Read Full Answer >>
  2. How will accepting a higher credit card limit affect my credit score?

    Accepting a high limit on a credit card positively affects a credit score, as long as the credit is not used. Once some or ... Read Full Answer >>
  3. How do prepaid debit cards work?

    Prepaid debit cards work almost like a combination of a credit card and a checking account. Prepaid debit cards are issued ... Read Full Answer >>
  4. Where are secured credit cards accepted?

    Secured credit cards can be used just like regular credit cards wherever credit cards are accepted. Secured credit cards ... Read Full Answer >>
  5. Do prepaid Credit Cards have monthly fees?

    While prepaid credit cards differ in their fee structures, some come with fees to purchase the card, activate the card, add ... Read Full Answer >>
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    Low interest rates have contributed substantially to increased lease rates in the automotive sector. In recent years, the ... Read Full Answer >>
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