Your FICO score can have a great impact on various aspects of your life. Everything from having a chance of leading a decent retired life to the ability of grabbing the best job in the market is determined by your FICO credit score.
Few years back, there was not much information amongst people about this magical number but now there is loads of information as well as misinformation everywhere. If you’re in the market for taking out a loan, make sure you initially go for credit repair so that you can get the best loan with the most reasonable rate. Your credit score is determined by various factors and if you max out your credit limit, you may be unknowingly affecting your credit limit terribly.
Credit limit facts
Facts 1 - Credit limit is nothing but the highest amount of money that a financial company allows a credit card holder to use on a single credit card. The credit limit of a person is determined by considering his credit risk. Any new line of credit will be determined on the basis of the risk that you pose to the lender. If the credit card company sees that you’re a reckless shopper, he will set a low credit limit for you so that even if you cross the limit, you’ll be charged hefty over-the-limit fees. The most important factor that is taken into account while lending new lines of credit is the credit risk as this will let you know the credit limit and the interest rates. A person’s credit risk is determined by factors like income level, stability of his job and also his credit history.
Facts 2 - The people with significant and valuable assets, little amount of debt and an exceptionally good credit history, will get a loan with more money and lower rates than the people with huge debt amount and no assets. While some companies allow the cardholders to surpass their credit limit under some specific circumstances, others may not.
Facts 3 - Credit limits offer some benefits like protecting the borrower from crossing the limit while borrowing too much money. Apart from providing the borrower with the aforementioned advantage, the credit limit also protects the lending company from being over-exposed to the reckless spending habit of the card holder. On the other hand, credit limit may also impose some serious kind of restriction on the borrower, dropping the items that he may purchase with a card. It also restricts the income potential for a lender as the borrowers will have lesser chance to exceed the credit limit.
Facts 4 -If you want to increase or decrease the credit limit on your card, you can simply call the financial institution from where you have taken out the card and make a request. If you think that you’re a compulsive shopper, it’s better to reduce your credit limit. Despite trying to change your financial behavior, if you can’t make much difference, the first step that you must take is to reduce your credit limit so that you may not cause further damage to your finances. Though you may be able to manage your personal finances by reducing your credit limit, you must also remember that this will leave you with not much available credit during an emergency. Thus, you need to be more diligent while dealing with a card that has low credit limit.
Final thoughts
If you find that you need a reduced credit limit, get in touch with your credit card company and give them the required information. Use your cards responsibly so that you need not run to credit repair agencies for improving your credit score before going to get new lines of credit.