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There are any number of reasons a credit card issuer or other lender might assign you a low credit limit. Some factors affecting credit limits include how long you've held credit, as well as your credit score, income and overall debt obligations.
Here's an overview of why you might have a low credit limit, and what you may be able to do to change it.
Reasons Your Credit Limit Could Be Low
Reasons for a low credit limit include the following factors.
Limited Credit History
If you are new to the world of credit and haven't yet demonstrated much of a track record of borrowing and repaying debt, lenders may be reluctant to grant you a high credit limit. In that case, having some patience and demonstrating that you can handle debt responsibly may help you gain a higher credit limit.
If you're issued a card with a low credit limit, try using it regularly for small transactions you can pay off in full each month, and make sure to pay your bills by their due dates. Doing so spares you interest charges and establishes a solid payment history that can boost your credit scores and reassure creditors. After six months to a year of this pattern, you may have success if you ask the card issuer for an increase in your credit limit.
Learn more: How to Build Credit: A Comprehensive Guide
Low Credit Score
Many credit card issuers use credit scores to help determine eligibility for various cards and to help set the credit limits and interest rates they charge on those cards. Since a low score could indicate limited credit experience, a history of late or missed payments or more serious events such as bankruptcy or foreclosure, it could cause a lender to put a relatively low cap on your credit limit.
Proven steps to improve your credit scores can help you qualify for higher credit limits, but you'll need some patience. Pay all your debts on time, reduce credit card balances and avoid applying for too much credit to begin rehabilitating a poor credit score.
Low Income in Proportion to Outstanding Debt
Credit card issuers typically ask you to declare your income as part of their application process, and they may verify that figure upfront or anytime while you maintain an account with them. They can also get a sense of your total debt by examining your credit reports.
Recent Reduction in Credit Limit
If the issuer of one of your current credit cards has recently lowered your credit limit, when you apply for a new credit card, you might get a lower credit limit offer than you would have otherwise. A prospective new lender might see your existing creditor's decision as grounds for caution.
Factors Beyond Your Control
Lenders sometimes reduce credit limits as a matter of internal policy, in response to business pressures or economic trends. During the 2008 financial crisis and the COVID-19 pandemic, for instance, some card issuers reduced credit limits on dormant accounts (or even canceled them altogether) to contain the risk of customers getting overextended and becoming unable to repay what they owe.
How to Find Out Why Your Credit Limit Is So Low
With so many potential reasons for a low credit limit, it's important to review the factors your individual credit profile may be contributing. Narrow down the causes so you can determine what action is needed to increase your credit limit by taking the following steps.
Ask Your Lender
If you're disappointed with the credit limit on a card you've just been issued, you can ask your lender about it to help you understand the reason for your low limit.Creditors typically don't explain how they assign credit limits, but if they deny your request to increase your credit limit, they must tell you why in a notice known as adverse action letter that explains their decision. This explanation could help you focus on the issues that matter most to that lender.
A creditor also must issue an adverse action notice under these circumstances:
- They denied your credit application.
- You applied for a particular credit card and were instead offered a different card with different bonus features and/or a lower credit limit.
- They reduced your credit limit.
Review Your Credit Report
You can get your credit reports from each of the national credit bureaus (Experian, TransUnion and Equifax) at AnnualCreditReport.com. Review each report carefully, noting late payments or other negative information that could have led your card issuer to restrict your credit limit.
If you see any entries you consider inaccurate, you have the right to file a dispute with the credit bureau reporting the information.
Check Your Credit Scores
You can check your own credit scores through any number of no-cost services, including getting your FICO® Score☉ Θ free from Experian. When you do, you'll typically receive a list of top risk factors that explain the reasons your scores aren't as high as they could be. Some examples include "too many high credit card balances" and "time elapsed since your most recent account opening is too short" (meaning your newest account is so recent that lenders can't tell if you've run up a high balance on it).
These explanatory notes can offer some insight into reasons a lender might hesitate to offer a higher credit limit, and suggest issues you can address to increase your odds of a credit limit increase.
Can Your Credit Limit Decrease?
Yes, a creditor can reduce your credit limit under certain circumstances, as spelled out in your credit agreement. If your card issuer reduces your credit limit, they cannot charge you fees or impose penalty interest rates for exceeding your new borrowing limit until at least 45 days after they notify you of the credit limit cut.
If a lender reduces your credit limit, they typically must provide an adverse action notice, explaining the reason for the change. Reasons could include:
- A major drop in your credit scores
- Frequent instances of exceeding your borrowing limit
- Missing or skipping scheduled payments on your account
How a Low Credit Limit Can Affect Your Credit Scores
Credit limits play a large role in determining your credit utilization ratio—the percentage of available credit you're using. Utilization is an important influence on your credit scores. If a lender lowers your credit limit, that can raise your utilization ratio and hurt your credit scores.Lenders and credit scoring systems evaluate overall utilization ratio (the sum of all your outstanding revolving balances as a percentage of the sum of all credit limits), as well as utilization on individual accounts. So, if you have an outstanding balance on any revolving account, a reduction in the credit limit for any of your cards or credit lines will increase your credit utilization.
Here's an example: Let's say you're making a $1,000 credit purchase and deciding which of your two credit cards to use. The credit limit on Card 1 is $3,000 and on Card 2 is $5,000, and there's no outstanding balance (0% utilization rate) on either card.
- If you place the charge on Card 1, the utilization rate for that card will be 33% ($1,000/$3,000).
- If you use Card 2 instead, its utilization rate will be 20% ($1,000/$5,000).
- In either scenario, your total utilization rate will be 12.5%: ($1,000 + $0)/($3,000 + $5,000). If the issuer of the unused card reduces your credit limit by $1,500, the utilization rate on the card with the balance will not be affected, but your total utilization will jump from 12.5% ($1,000/$8,000) to 15% ($1,000/$6,500).
Individuals with excellent credit scores tend to keep their utilization below 10%, and experts generally advise staying below 30% to avoid doing extra damage to your credit scores.
Note: Utilization rate is responsible for about 30% of your FICO® Score. It's only slightly less influential than payment history, the single most important credit score factor, which accounts for 35% of your FICO® Score.
3 Ways to Increase Your Credit Limit
Because credit limits can affect credit scores, steps you can take to improve your credit scores, such as making payments on time, avoiding high balances and seeking new credit only as needed, can increase your chances of getting higher credit limits. Checking your credit reports and scores regularly can help you track progress in these efforts.
As your efforts progress, you can try any of these strategies to increase your credit limit:
1. Ask for a Higher Credit Limit
You'll never know until you ask. Apps and web portals for many credit cards let you request a credit limit increase with a few clicks, and many provide instant responses: If an increase is approved, it'll apply to your account immediately. And if it's declined, the lender must provide an explanation that can guide you toward getting to a "yes" next time you seek a credit limit increase.
Note: If you ask for a credit limit increase, it may trigger a hard inquiry on your credit report, which can cause a small, temporary drop in your credit scores. If that concerns you, ask your creditor if they will perform a hard inquiry before having them process your credit limit increase request.
2. Report Additional Income
If you've had a bump in pay or added a new income stream (such as a side hustle) since you obtained a credit card, you could be eligible for a higher credit limit. Update your income in the profile section of your card management app or website, or contact your issuer directly to inform them of the change.
The card issuer may ask for backup documentation such as pay stubs or tax returns before they increase your credit limit.
3. Seek a New Credit Card
An additional credit card increases your total available credit and can lower your overall credit utilization rate. If you qualify, it can also bring access to rewards and deals and more affordable interest rates.
Keep in mind that new card applications can trigger credit checks that may cause a small, temporary drop in your credit scores.
Instead, consider card-shopping using a prequalification service such as Experian's credit card comparison platform. Prequalification can give you a good idea of the card types, credit limits and interest rates you qualify for, without requiring a hard inquiry. These estimates are based on your credit score and answers to a few questions.
Frequently Asked Questions
Why Did My Credit Limit Increase?
Sometimes, a card issuer increases your borrowing limit proactively. While this can feel spontaneous, it's typically a result of careful lending policy—and a feather in your cap for responsible credit management. It may be a reflection of improved credit scores and a proven track record of timely payments, for example. It can also be an indication that the lender is optimistic about the big economic picture, and is willing to encourage you to borrow a bit more.
As you savor your greater borrowing power, take care to use it judiciously. Running up a higher balance just because you can will offset the potential benefits of lower utilization rates, and could mean additional interest charges.
How Much of My Credit Limit Should I Use?
Once again, understanding credit utilization ratio—the percentage of your available credit you're using at a given time—is crucial to deciding how much of your available credit to use.
In general, the lower your credit utilization ratio, the better your credit score. Exceeding a total utilization ratio, and ratios for each credit card, of about 30% can cause your credit scores to decrease more precipitously.
People with exceptional credit scores (800 or higher on the FICO® Score range of 300 to 850) tend to keep total utilization and utilization on each credit card below 10%.
What Happens if I Go Over My Credit Limit?
If you initiate a transaction that causes your balance to exceed the borrowing limit on the card, also called maxing out your credit card, the card issuer's policies determine what happens. To find these policies, look for the relevant section in your cardholder agreement.
In some cases, transactions are declined if they would cause a card's balance to exceed its limit. In others, they are approved, but you may be charged a fee or a higher interest rate.
The Bottom Line
Low credit limits can be normal (if challenging) for credit newcomers and individuals working to rebuild less-than-stellar credit histories, but they don't have to be permanent. In time, with good credit habits such as paying your bills on time keeping utilization in check, you'll likely qualify for increases in the borrowing limits on existing cards, and new cards with higher credit limits and other benefits.
Before applying for new credit cards, checking your FICO® Score for free from Experian can help you know where you stand.