The credit limit on a credit card differs from one card to another. Some have a higher limit, which means that the user can purchase more with the card, while others have a lower limit. But have you ever wondered why this is the case? What parameters do the lenders use to determine how much they will give to one person?
Your credit limit is not only important because it dictates the buying power, but also because it affects your credit score. Spending more on your credit card increases the utilization ratio and hurts the credit score in return.
For now, it is important to know what is used to determine the limit you will get when applying for a credit card. It will help you in setting some things right beforehand.
Your Current Income
When applying for a new credit card or changing the limit on your current one, the creditor will ask for a pay slip for employed people or bank statements for businesspeople. The aim is to look at the income as it dictates the power to pay back the debt and interest. Thus, if you earn more every month, you are more likely to be approved for a higher limit. Likewise, having a low income will attract a lower credit limit.
The Status of Previous Credit Cards
If you are not a first-timer with credit cards, the lender will want to know the limit status of your other credit cards. If they have a high credit limit, you are likely to get approved for a higher one. This means that you have been responsible enough and those creditors can trust you. There is nothing much you can do in the case of credit cards with lower credit limits unless you apply for an increment on them.
The Credit History
Earlier, we mentioned that a lower credit limit will affect your credit score. But if you have a low credit score and poor credit history, the creditor will only approve a lower credit limit. In some cases, they may decline to give you credit card at all. You can read more on how to boost your credit history on the Boostcredit101 website before applying for a credit card. It will increase your chances of getting a high score.
Will You Secure the Credit Card?
There is some good news for some people. If there is security like an asset, you get to control the credit limit that you want. The creditor can always reach your security item in case you are having difficulties repaying the debt. This is a more updated option which was not available in the traditional credit cards. Luckily, it is a timely solution that has helped many people to enjoy higher credit limits even when other factors do not allow it.
You ultimately have the power to control the amount of credit that you will get. All you need is some time and good plan for your finances. In return, you will start to raise the credit score to higher levels.