A credit limit is the maximum amount you can spend on a credit card. Your card provider will set your limit when you take out your credit card but it can change depending on how you use it. Sticking to your limit is important for building better credit. In this guide, we’ll help you understand how credit card limits are set, what you can do to increase and decrease your credit card limit, and whether you should.
Your credit card provider will use the information you’ve provided on your application along with your credit report to set your credit limit when you sign up for your card. The main factors they’ll look at are:
Most providers will give the range of the potential credit limit they offer on a specific product. However, you’ll only know your individual set limit once you’ve submitted a full application and have been accepted.
If you’ve been accepted and are not happy with the credit limit offered, you can choose to not sign the card agreement, but bear in mind that the application will still show up on your credit report.
This will depend on the terms of your individual credit card. If it’s possible to go over your limit – it’s not a good idea. Going over your credit limit may affect your credit score. You should do all you can to avoid going over your credit card limit.
Spending over your set limit may have negative consequences both now and in the future, which could include:
If you have an Aqua card, we’ll send you a message if you’re getting close to your credit limit. It’s important to get in touch with your provider as soon as you realise you’ve gone over your limit and try to pay off the excess balance as soon as possible.
Your credit card provider may increase your credit limit from time to time, if you make your payments on time and stick to your existing limit.
You can also ask your provider to increase your credit limit. It’s worth thinking about why you want to increase your limit, how you’ll use any increased limit, and whether you’ll be able to make repayments.
For example, if you need to pay for essential repairs to your car but have worked out a repayment plan, then it might be sensible to increase your credit limit. However, if you’re planning a holiday and just want a bit more spending money, then increasing your limit might not be such a good idea. Remember: a higher credit card balance means more interest .
If you do want to increase your credit card limit, there are a few things you should be doing:
Not necessarily. If you’re regularly using all of your credit limit – no matter what it is – it’s a sign that you may not be managing your credit well.
On the other side, having a higher credit limit can help to show that you can be trusted with credit, but the bigger impact can be on what’s known as your credit utilisation ratio.
Your credit utilisation ratio (or credit utilisation rate) is the amount of credit you’re currently using divided by the amount of credit you have available to you. For example, if you only have one credit card with a limit of £500 and a balance of £50, your utilisation ratio is 10%.
The important thing to remember is – as far as your credit utilisation ratio goes, the less of your credit you’re using, the better. A utilisation ratio of 10%, as in the above example, looks better on your credit report than a ratio of 95% because it shows lenders that you’re managing your money and that you’re not stretching your finances.
It only applies to credit cards and other forms of credit that don’t have a pre-determined end date, which means mortgages and loans don’t count, but it can still be an important factor in your credit score.
Yes – you can ask to reduce it at any time, for example, if you find you’re not spending anywhere near your credit limit. If you’re happy with your existing limit or worried that a higher limit might tempt you to spend more, you can also reject any increase your card provider offers.
Alternatively, if you don’t want to increase your limit at all, you can ask your card company to opt you out of and increases. With Aqua, you can do this using your Online Account Manager or using our automated customer service phone line.
There’s no set amount of time for us to consider increasing your credit limit. We continuously monitor your account to see how you’re getting on and may increase your limit, so long as you’re making your monthly payments and sticking to your current credit limit.
If you apply for an Aqua card, the credit limit we offer will be based on your personal circumstances. To give you an idea, we’ll provide an initial limit of between £250 and £1,500.
Failure to make payments on time or to stay within your credit limit means that you will pay additional charges and may make obtaining credit in the future more expensive and difficult.
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