Ever wondered why your credit card has a spending cap? Or why your credit score drops after a big purchase, even if you pay on time? 🤔That mysterious number—your credit limit—plays a bigger role in your financial life than most people think. Whether you're new to credit cards or just trying to make smarter money moves, understanding how credit limits work can help you build stronger credit, qualify for better rewards, and avoid unnecessary fees.
Let’s break it down in a way that actually makes sense.
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Your credit limit is the max amount you’re allowed to spend on a credit card before the lender says, “Whoa, that’s enough.”
Let’s say your card has a $5,000 limit. You can use your card to make purchases—groceries, gas, flights, brunch with your besties—up to $5,000. But once you hit that cap, you’ll either get declined or charged an over-limit fee.
Think of it like a gas tank. If your tank (aka credit limit) is full, you’re good to go. But if you’re riding on E and still swiping, your card might just say "nope".
Questioning how much a credit card lender decides how much they can trust you with? 🤔
Your credit limit isn’t just a random number—it’s based on a few key factors that help lenders figure out how likely you are to pay back what you borrow. Here’s what they look at:
Your credit score: A higher score = more trust = usually a higher limit.
EXAMPLE: If you’re fresh out of school with a part-time job and a short credit history, your first credit card might have a $500 or $1,000 limit. But if you’ve been responsibly managing credit for a few years and have a solid income, you might qualify for a $10,000+ limit—or even Skyla’s Visa Signature card with a limit up to $50,000. |
Use credit wisely, and your limit can grow with you. 🙌
Your credit limit plays a huge role in determining your credit utilization ratio, which is the percentage of available credit you’re using. This ratio makes up about 30% of your credit score, so keeping it in check is essential.
So, why does this matter? Because even if you're doing all the right things—like paying your bill on time—maxing out your credit can still hurt your score. That’s where your credit utilization ratio comes in.
Your credit limit is a major factor in what’s called your credit utilization ratio—basically, how much of your available credit you're using. And this makes up a hefty 30% of your credit score.
QUICK TIP: The golden rule? Try to stay below 30%. Want an even better score? Aim for under 10%. |
So if you’re using a big chunk of your limit, your score could take a dip—even if you pay your bill on time.
It’s easier than you think! To figure out your credit utilization, just use this formula:
(Your current balance ÷ Your total credit limit) x 100 = Credit utilization %
EXAMPLE: Let’s say your credit limit is $50,000, and you’ve spent $12,500 so far. |
To avoid these disasters, set up alerts to let you know when you're close to maxing out. It’s like having a friend text you, “Hey… maybe don’t buy that 4th pair of sneakers this month.”
QUICK TIP: If you're constantly going over your credit limit, it may make sense to request a credit limit increase with your lender. This can help eliminate some of the disasters, but make sure you're able to pay your balance and not go over your credit utilization. |
Many cardholders request a credit limit increase to access more spending power and improve their credit utilization ratio. You can often request an increase by:
Contacting your card issuer for a review of your request
Higher limits can lead to lower utilization, which can positively impact your credit score, as long as you don’t start spending more just because you can.
Yes! Whether you’re building credit, consolidating debt, or just want better perks—Skyla’s got a credit card that fits your goals. Here's a quick peak:
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Want a better look at the credit card options Skyla offers?
Now that you know how credit limits impact your credit, the next step is to manage your spending wisely and explore options to increase your limit when the time is right.
Check if you qualify to upgrade to the Skyla Visa Signature Credit Card and maximize your credit potential today.
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