Credit Limits

A credit limit is the maximum amount that a lender will let you borrow. For credit cards, the credit limit is the maximum amount you can put on the card. Credit limits are important, because they help determine your credit utilization ratio – the amount of credit you’re currently using vs. the amount that is available to you. Your credit utilization rate is a factor in determining your credit score.

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How Credit Limits Affect Your Credit Score

If you have more than one credit card, credit-scoring models will consider both the individual credit utilization ratio for each card or account, as well as your credit utilization for all cards and accounts. In general, having a low credit utilization ratio (having a large amount of credit available to you and utilizing only a little of it) is better for your credit score.