Credit Limits

If you have a credit card, you have a credit limit. The extent of that limit is based on your credit history and your relationship with the creditor. Generally speaking, credit card companies are happy to give high credit limits. This is because to them it means you will be likely to spend more and they’ll make more interest. But you don’t have to accept the credit limit they offer. If you feel it’s too high, you can ask them to lower it and they will. If you feel it’s too low, you can ask them to raise it! But is it better to have a high credit limit or a lower one?

It depends on your willpower and your circumstances. Credit scores are determined in part by the amount of available credit you have on credit cards compared with the amount of credit you’re using. Creditors want to see a low ratio of credit used to credit available. “Low” is generally considered below 30%. This means that if you have $100 in outstanding credit and a limit of $100, you won’t look very attractive to potential lenders. It will seem as though you have no willpower. It could also look like you will run right out there and use up all available credit given the chance.

If you have $100 in outstanding credit and a limit of $1000, you’ll be much more attractive to potential lenders. It will be obvious that you can show restraint and use credit responsibly. So my advice is to know yourself and if you are confident that you can handle it, go for a higher credit limit than you know you’ll use. You don’t want your credit usage to exceed 30% of the available credit, so keep that in mind when choosing a limit.