We all use dozens of credit cards, most of them have different credit limits, but we aren’t aware of how these credit limits on credit cards are set, are we? Let’s discuss how this thing works.
It’s been more than 5 years I have left my previous employment, which was a credit card company. However, I can still recall how they set credit limits for different people. There are two main factors that influence the credit limits on credit cards for an individual. These two factors are annual income and credit score. Approval of a credit card also depends mainly on these two factors.
For instance, if your score is 642 and your annual income is around $17,000 your card application would be approved with a limit of $1,000. And if your score is 639, or 567, or anything below 640, your application would be declined. This is, however, just a sample and away my previous company uses to set credit limits on credit cards. Different card providers use different criteria, factors being the same.
However, the process is a bit more intricate than how I made it sound. There are many other charts that would supplement this chart, and accordingly, the credit limit would vary. But two major reasons affecting the credit limit to a larger extent are income and score.
Similar factors are taken into consideration when you apply for an increase in credit limit. Additionally, they check how you use your credit cards like do you use it to make cash advances, do you often miss payments, have you ever paid off in full, etc.
If you want to increase your credit limit, you need to do a few things.
Increase your income: As mentioned, this is one of the key factors influencing credit limits on credit cards. If you have managed to increase your salary, it’s very likely that your application for increasing limit would be approved.
Improve your score: The exercise of improving your score pretty much covers everything you need to increase credit limits. To improve your score you need to make payments on time, not to utilize credit balance in full, etc.
There may be other factors that influence the company’s decision of increasing your credit limit on credit cards. but I am not quite aware of the recent trend, as the details provided by me are around 5 years old.
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