How Banks Determine the Credit Limit of Credit Cards
Last Updated : Dec. 8, 2020, 5:35 p.m.
Whenever a user applies for a credit card he is always worried about the credit limit offered by the banks. There are many factors that a bank looks at while deciding the credit limit of the card. If you fulfil all the criteria of the limit then there are high chances of enjoying a good credit limit. So, here you can see how the banks determine the credit limit of the credit cards. You can enjoy a high credit limit on your cards if you have a high income and a good employment status. So, let’s see the key factors that are responsible for deciding the credit limit.
Factors Responsible for Determining the Credit Limit
You must go through all the factors that will help you to enjoy a high limit so that you can spend more during a month.
Annual Income of the Individual
The income of the individual is one of the important factors that are responsible to decide the credit limit of the credit card. If you are having a high income then it is obvious that the bank will give you a high credit limit. On the other hand, if you are having a low income then your credit limit will also below.
Age of the Individual
The age of entry for taking a credit card also determines your credit limit. If you have just entered 18 years of age then the bank will give you a normal credit limit that will be not too high. But if you become experienced and have already used many other credit cards then the bank will increase your credit limit and gives you a high limit.
Active Debts
The bank also checks the active debts of the individual. If you are having outstanding loans and credit card bills then the bank might reduce your limit. On the other hand, if you are free of debts then there are chances of getting a high credit limit on your credit cards.
Debts in Your Name
If any of your family members have borrowed a loan in your name then also it will be counted as your own debt. Therefore, if you have a high outstanding debt then the bank might reduce the limit of your credit card . If in case there are no debts against your name then you can enjoy a high credit limit on your credit card.
Credit History
The credit history is always a determining factor for deciding the credit limit to the banks. They will look at your repayment history that how you have managed your previous loans and debts. If they find there was a lag in payments or delay in payments then they might reduce your credit limit. So, make sure that you pay all the outstanding debt on time in order to maintain a good credit history.
CIBIL Score
A Cibil Score is a three-digit number and it is between 300 to 900. You will need a minimum Cibil Score of 750 and above to get quick approval and a high credit limit on your credit cards. If in case your Cibil Score is below 750 then there are chances of getting a low credit limit. So, make sure that you have a good Cibil Score because every bank checks the Cibil Score of an individual before accepting the credit card application.
Employment Status
The bank also checks the employment status of an individual to determine the credit limit. The employment status includes the company’s name, designation, salary, and position. If your company is not a renowned company then you will not get a high credit limit on the credit card.
Conclusion
Well, you have seen how the Banks Determine the Credit Limit of the Credit Cards. So, before you apply for any credit card, you must make sure that you have gone through all the above determining factors. On the other hand, it is really important for you to have a good Cibil Score and high income to get a good credit limit.