Credit Limit

The maximum amount of credit that a financial organization will grant a customer is referred to as the credit limit. On a credit card or line of credit, a lending institution extends a credit limit. Credit limitations are often determined by lenders using the information provided by applicants for credit. An individual’s credit limit has an influence on their credit ratings and may limit their future access to credit.

Credit limitations are often determined by lenders using a consumer’s credit record.

High-risk borrowers typically receive lower credit limits from lenders because they lack the resources and capacity to pay back the debt. Higher credit limits are frequently granted to low-risk borrowers, providing them more freedom when making purchases.