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Once you reach that limit, you cant put anything else on that line of credit.
Of course, credit cards arent the only lines of credit available.
What you might not know is that your credit limit affects your credit score and beyond.
How Are Credit Limits Determined?
The underwriter will take a look at your annual income, your credit history, your payment history i.e.
paying rent and bills on time and how much credit youre already using.
What Happens If I Go Over My Credit Limit?
This depends on whos lending it.
Most likely, your card will be declined.
Usually, if its a one time occurrence, it wont affect your credit score.
Whats the Difference Between Available Credit and My Credit Limit?
Your available credit is the total amount of credit that financial institutions have extended to you.
Your credit limit is a figure specific to each line of credit.
However, your credit limit on the first card only reaches $2,000.
Additionally, your available credit decreases every time you use it.
If you pay off the full balance, your available credit goes back up to the credit limit.
What Is My Credit Utilization Ratio?
This is where its especially important to know the difference betweenavailable credit and credit limits.
Your credit utilization ratio determines about 20% of your credit score.
Credit bureaus look at this percentage when determining if you are a creditworthy borrower.
This could be a red flag for lenders.
How Can I Raise My Credit Limit?
With many credit cards, you could request an increase online.
you could also venture to call your credit card company and explain why youd like a credit increase.
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