Credit card Q&A: “What credit card limit can I get?”
Are you curious what you’ll qualify for in the way of a credit card limit, or if you’ll even be approved to begin with.
Well, unfortunately, it’s always a bit of a mystery until after you apply and receive your credit card (and its related terms).
That’s right – there’s no turning back once you hit the apply button. The hard credit inquiry will show up on your credit report and the credit card issuer will make their decision.
You may have been hoping for a $10,000 credit card limit, only to find out minutes later that they approved you for a measly $1,500. At that point, you may be fuming, wishing you hadn’t even bothered in the first place.
So what can you do to avoid such surprises you ask?
Guessing What Your Credit Card Limit Might Be
Well, you can certainly clue yourself in a bit before you apply for a credit card, though there’s never any guarantee.
Credit card issuers tend to look at two main things when determining your credit limit, those being your credit score and your income.
It used to be household income, but now it’s just your income, since living with your wealthy parents doesn’t necessarily mean they’ll pony up if you can’t pay your debts, especially if they aren’t actually co-signers.
Credit card companies also ask for employment information (and schooling prior to that) to get a better idea of what you make, considering the fact that you simply write in a number on the credit card application.
They then take that information and look at it alongside your credit score, together with the information in your credit report, to determine your credit card limit.
If you already have high credit limits on existing credit cards, there’s a decent chance you’ll get similar limits on any new credit card you apply for, assuming those limits aren’t exhausted or near their max.
Conversely, if your existing credit card limits are low, don’t be surprised to receive similar limits on subsequent credit cards (unless you input significantly higher income on the credit card application).
Lower Credit Scores and Income = Lower Credit Card Limits
As you can see from this sample credit limit matrix from Credit Karma, those with lower credit scores and lower gross annual income will receive lower credit card limits, and vice versa.
[See my range of credit scores to see where you stand.]
So a consumer with an average credit score and low income who applies for a credit card may receive a $3,000 credit card limit, while a consumer with an excellent credit score and higher-than-average income may receive a $25,000 credit card limit.
Of course, it’s hard to just say, “You make X amount and have Y credit score, so you’ll receive Z limit.” It’s likely a lot more complicated than that, and if you don’t work for a credit card issuer, you’ll never really know all the details.
The takeaway here is that those with more income and better credit scores tend to receive bigger credit card limits. So if you want a big limit, you know what to do.
Additionally, those with limited credit history will probably see lower credit card limits than those with proven track records of supporting large amounts of debt, so understand that it takes time. You need to build trust in order to be trusted.
Lastly, if you’ve already got lots of outstanding credit card debt and your credit utilization is high, expect subsequent credit card limits to be quite small because credit card issuers don’t like to provide more credit so those who are already overextended.
In other words, a good job coupled with a solid credit score won’t necessarily equate to a large credit limit if you’ve already blown through your existing cards.
Tip: Having a lot of outstanding credit card debt can lower your credit score, so it’s best to keep balances to a minimum, regardless of how high your credit card limit might be.