How is your credit limit set?
Providers look at several factors to determine your credit limit, including:
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Your credit score: The higher, the better.
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Your income: More income could mean a higher limit.
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Your existing debts: If you already owe money, your limit may be lower.
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Your credit history: Consistent, on-time payments work in your favour.
They’re basically looking for signs that you’re likely to pay back the money you borrow.
Can you increase your credit limit?
If you’re a reliable cardholder who always pays on time, you may be eligible for an increase. However, it’s important to consider whether you really need one and if you can afford higher monthly repayments.
You can request an increase by either:
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Contacting your provider: Some banks let you apply for an increase online or by phone.
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Waiting for an automatic review: Some providers automatically review and adjust limits for good customers who they consider to be low risk.
Keeping a strong credit score and making timely payments can make you a candidate for an increase, whether you apply for one or wait for an automatic review.
If you feel tempted to spend, you can also request your credit limit to be lowered. Simply contact your provider to request a decrease.
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Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.
What happens if you go over your limit?
It’s important to know what your credit limit is so you can avoid going over it. Going beyond your credit limit can lead to:
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Your transaction being declined
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Possible impact on your credit score: A higher outstanding balance can affect your credit score and ability to get credit in the future.
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Extra fees: Many providers charge a fee if you exceed your limit.
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Potentially losing any promotional offers you have
Tips for using your credit limit wisely
Here are a few practical tips:
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Track your spending: Regularly check your balance to avoid overspending.
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Set alerts: Some apps allow you to set notifications when you’re close to your limit.
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Use under 30% of your credit limit: Staying below this amount can help improve your credit score.
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Set up a Direct Debit: Setting up automatic payments for at least the minimum amount (or more if you can) will help to reduce the balance faster. It will also help you avoid missing payments.
Using your credit limit responsibly can help you build a strong credit history and stay in control of your finances. If your limit feels too high or low, remember you can reach out to your provider to discuss adjustments.
Disclaimer: All information and links are correct at the time of publishing.
Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
