What is a credit limit?

A credit limit is the maximum amount you can spend on your credit card.  

This means a credit limit is how much money a lender is comfortable lending you as a line of credit for a loan or credit card. The amount offered is based on several factors including your credit score, payment history, income, and current credit utilization.

Increasing your credit limit

There may come a time when you determine that the amount of money you can borrow against or spend on your credit card is insufficient. If that is the case you will have to make a request to the lender to increase your credit card limit. When doing so, they will review the request and determine your eligibility based on:

  • Your ability to make your payments on-time 
  • You make more than the minimum payment or you pay your balance in full each month
  • You have an appropriate credit score
  • You had an increase or change in your income
  • Your credit card utilization

It is important to understand that if you request a credit limit increase, this could result in a hard inquiry on your credit report and may temporarily impact your score. 

What happens if you exceed your limit?

Always be aware of how much you’re spending to avoid exceeding your credit limit. 

Here are some examples of what to expect if you exceed your credit limit:

  • Your purchase could be declined
  • You may be charged an over-the-limit fee
  • Your credit score may decrease if your credit utilization increases

It’s important to understand your spending habits, know your balance, and not spend more than you can afford to pay off every month. 

If you find yourself in a position where you need to request an increase in your limit, make sure your income is at the level that can support any increased spending that you are expecting to make. This will help you budget correctly and not over-utilize your credit cards.