Factors That Affect Your Credit Limit

New Delhi (India), March 22: When you buy something using your credit card, you do not have to pay the dues immediately. The payment is made only after the monthly bill for your credit card is generated. Since a credit card allows you an interest-free period of around 45 days, it comes in handy for unexpected expenses such as buying consumer durables or during a medical emergency. Times like these can be stressful if you do not have sufficient balance in your bank account.  

The extent to which you can stretch your credit depends on the credit limit assigned to your credit card by the issuing company. 'Credit limit' is a term that refers to the maximum amount you can borrow on your credit card. The bank fixes the limit depending on their perception of your ability to pay as well as your past record of payments on credit availed.

A higher credit limit is beneficial when you need funds immediately - such as the sudden hospitalisation of a family member or any unplanned expenditure. Having a high credit limit available on your credit card is always welcome. In this article, we will discuss the basic factors that affect your credit limit and some ways to enhance it.

Several factors are taken into account while fixing the credit limit on your credit card. The most important one is your reported income. Your credit score and credit history also significantly impact your credit limit. Whether or not you have existing outstanding loans or other credit cards is also significant. The credit limit on your credit card is initially set at a lower level, but this is revised periodically. Good payment history on the credit card will certainly help you get a higher limit in due course.  

How to Increase Your Credit Limit

1. Utilise your credit limit sparingly: Consistent low utilisation of the credit limit on your existing credit card indicates you are not hungry for credit. As a general rule, the higher the ‘hunger’, the lower the limit, and vice versa. Keeping the credit utilisation low, vis-à-vis the available credit limit, helps you enhance your credit limit gradually.  
2. Pay your credit card dues promptly: Promptly paying your credit card dues without waiting for the due date to arrive will help you avail of a higher credit limit. Moreover, a history of prompt credit card payments helps you improve your credit score and is considered good conduct by the credit card issuer.
3. Maintain a high credit score: Since your credit score plays a very important role in setting the credit limit on your credit card, it is essential to keep your credit history as spotless as possible. A higher credit score will certainly help enhance your credit card limit in future. You can keep your credit score high by paying your loan EMIs and credit card dues in full by the due date. Any carelessness in maintaining the credit score could adversely affect the credit limit - it can lead to a reduction in the credit limit and may also result in the cancellation of your credit card on review. It is a good habit to access your credit report (which can be done for free) more frequently and monitor your credit score regularly.  
4. Request for a credit limit increase: You can formally request the credit card issuer to raise your credit card limit if your income has gone up significantly after the issuance of the credit card. Even if your credit score is not particularly high, the credit card issuer may consider your request favourably and enhance your credit limit.  
5. Use your card more often: Regular use of your credit card helps the bank judge your credit repayment conduct. This comes in handy when they review your credit limit in future.
6. Be a model customer: Good behaviour is rewarded even by credit card issuers. If you follow all the rules and have a good record as a customer, the credit card issuer is likely to enhance your credit limit in due course.

Conclusion

IDFC FIRST Bank provides instant alerts for spends made on your credit card. With IDFC FIRST Bank, you can access your credit card transaction history online and monitor your credit limit utilisation any time. This practice will also help you maintain a good credit score. Apply for an IDFC FIRST Bank credit card online on idfcfirstbank.com.