Credit limits

When you open a credit card account, a credit limit is set – this is the maximum amount of money you can owe at any one time on that card. It may be changed depending on how well you manage the card.

What does it mean to have a credit limit?

For example, if your credit card has a credit limit of £3,000, and your balance stands at £2,000, then you have a remaining £1,000 to spend on it. If you go over that limit, you’ll usually have to face penalty charges and won’t be able to spend on the card until the balance has been reduced.

How much credit can I get?

When you apply for a credit card, the provider will let you know the credit limit. They decide how much to offer by looking at various factors, such as your application form, information from your credit report and the provider’s own data (e.g. if you’re already a customer). The information they consider typically includes:

  • Your credit history – e.g. if you’ve been a reliable borrower previously, have a record of missed or late payments, or if you’ve never borrowed before
  • Your available income – how much money you have left after paying living costs (e.g. bills, rent, groceries)
  • Your existing credit commitments – e.g. debt on other credit cards, loans, mortgages or overdrafts
  • Your credit limits elsewhere – how much you can borrow on your other cards, if you have any
  • Their own lending policy – credit limits can vary between card providers and different deals

What is a good credit card limit?

Not everyone has access to the same credit card deals, and a premium card will usually have a higher credit limit than a credit builder credit card (for someone with a low credit score), simply because the lender believes they’re likely to repay a higher amount. So, a good credit card limit is one that strikes a sensible balance between your needs and your financial ability. Always remember that money spent on a credit card is borrowed, and you must pay it back.

How can credit limits affect my credit score?

You don’t have one, universal score – each lender may use a different method to calculate it. So, how credit limits affect your score depends on the lender’s preference. For example, a large amount of available credit may make lenders think you’re too reliant on borrowing – they may even see it as potential debt. On the other hand, some lenders may view high limits in a positive light, as it shows that another lender trusts you to repay a large amount.

Lenders may also take into account what proportion of your ‘revolving’ credit (usually credit and store cards) you’re regularly using. For example, if you’re maxing out your credit card limit each month, this may count against you.

How much of your credit card limit should you use?

Generally speaking, it may be helpful to have a reasonably high credit limit, but using a relatively low percentage of it. This often looks best to lenders, as it shows you can borrow credit, but you’re not heavily reliant on it.

So, for a healthy credit score, try to use no more than 25% of your credit limit each month. You can do this by spending less on your card, or getting a higher limit. For example, if you shifted a balance of £1000 from a card with a limit of £2000, to a new card with a £4000 limit, the amount you’re using would change from 50% of your limit to 25%. Remember, you should only borrow as much as you can comfortably afford to repay.

How do I get a higher credit limit?

Managing credit responsibly can help you build up a good credit score, and as your lender sees you pay off your credit card successfully, your chances of increasing your credit limit may improve.

The longer you stick to the agreed payments, the more reliable a borrower you’ll look. After a few months, assuming you’ve kept up with the repayments and managed other credit well, you could ask your lender to increase your limit - or they might offer it to you to encourage you to use it more.

3 tips to stay under your credit limit

  • Keep an eye on your spending so that you don’t get close to the limit
  • Set up text or email alerts to notify you if you’re getting near the limit
  • Set up a direct debit to make the monthly card repayments automatically – this should help you avoid missed or late payments

Compare credit cards to find the right fit

Each time you apply for credit, a hard credit search is recorded on your credit report. If lenders see too many credit applications at once, they might think you’re over-reliant on credit and decide that you’re a risk. However, comparing credit cards before you apply leaves a soft search on your credit report. This won’t affect your credit score, as lenders can’t see it.

When you compare cards with us, you’ll see your eligibility rating for each deal. This indicates your likelihood of being accepted, so you can make better decisions about which card to apply for – just remember that we’re a credit broker, not a lender†. You can also get an idea of how lenders may see you by checking your Experian Credit Score.

Compare credit cards with Experian