How Is My Credit Card Limit Determined?

LONDON - SEPTEMBER 2015: Close up shot of the three major credit cards white background. Editorial

Credit card issuers consider a number of factors when determining your credit limit. Like any business, no financial institution wants to lose money, so every decision they make is based on the potential risk of extending someone credit, which is why your interest rate can fluctuate, depending on your payment history. If your account has been open for a long period of time, and you have a solid payment history, your card company may give you a higher credit limit. Your limit might also be raised if your annual income increases. However, if you are routinely late with your payments, your card issuer may deem you unreliable and lower your limit.

We have assembled the most relevant factors and discuss how they will determine your credit limit.

Credit Score

Before you are even issued a financial product or service, the lender will look at your credit score, which is a numerical value intended to show your creditworthiness. Many factors determine your credit score, including payment history, debt utilization, credit history, total number of accounts, the number of hard pulls and the number of derogatory reports.

  • Payment history: Demonstrates your ability to make payments on-time.
  • Credit utilization: Shows your debt-to-available credit ratio. Typically, if your credit utilization is below 30%, you will have a higher credit score.
  • Credit history: Shows how long your accounts have been open.
  • Total number of accounts: The number of open accounts on your credit report. These are not limited to credit cards but also include student and auto loans, mortgages and other bills.
  • Hard pulls: Shows the number of times your credit has been pulled by a potential lender. Too many inquiries could imply you are having financial troubles and desperate for credit.
  • Derogatory reports: Can include civil judgments, bills in collection, tax liens or bankruptcies. One derogatory report is enough to lower your credit score.

All of these factors will affect your credit score, which will determine your ability to obtain credit. They will also help card issuers decide how much credit to extend to you.


Card issuers will also consider your annual income when determining your line of credit. Income will help them determine whether you can cover the charges you make on your card. Generally, credit card companies have credit line tiers based on how much money you make annually. One exception to this would be a stay-at-home parent who applies for a card based on their partner’s income.

Payment History

Even after you have received your card, your credit limit is subject to change. Your credit line may increase or decrease based on whether you are making payments on time. If you make payments on a timely, regular basis, you may see a credit limit increase. However, if you miss payments or do not use your card regularly, your credit card issuer will maintain your current credit line unless your income increases substantially. If you do not want your credit limit to be lowered, it is important to make all payments on time.

Credit-Based Limit

There are two possible methods your credit card issuer may use to determine your credit limit. The first is the credit-based limit, which is based on a sliding scale and determined by your credit score. If you apply for a credit card that offers limits between $5,000 and $10,000, people with lower scores will be given $5,000, and those with higher credit scores will be given a limit of $10,000. Financial institutions can use these formulas to quickly determine an individual’s credit limit without going through every detail of someone’s credit report. There are exceptions, though. If someone has been with a card company for a long period of time, they may be given a higher credit limit than someone who is new to the company.

Customized Limit 

The second method for determining a credit card limit is the customized limit. It is similar to the credit-based limit in that it is a formula that enables credit card issuers to make fast decisions about your line of credit. The customized limit is more detailed, though, and considers a number of factors, including your income-to-debt ratio, bankruptcy score, credit score and the limits you have on other cards. Each company chooses what to include in its own customized limit formula, and there is no industry standard.

There are a number of factors that go into determining your credit limit, and decisions are often made at the company’s discretion. Like any other business, credit card issuers are trying to remain profitable, and they may not offer you a substantial credit limit until you have proven your credit worthiness with a positive credit history and on-time payments. Since credit limits are an important part of choosing the right credit card, make sure to do your research and find out which cards offer the limits you need.

About John H. Oldshue

John Oldshue is the creator of He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for
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