What is a credit limit?

Having more credit can give you extra financial flexibility. Here's a guide to how your limit is calculated and how you can increase and decrease it.

The credit limit on a credit card is the maximum amount you can borrow on that card at any one time. The credit card provider will set your limit based on what you would like your limit to be and how much you can afford to borrow.

They will look at various factors to assess this and your limit could be anything from a few hundred to a few thousand pounds. Usually, you won't know what your credit limit will be when you apply for your card, but it’s important to think about what is affordable for you.

Staying within your credit limit helps maintain your credit score by showing you can manage debt sensibly.

A lender will look at your credit history as well as other key factors to decide whether to accept your application and what credit limit to offer.

Some of the key factors a lender will consider as part of their affordability calculations are:

• Your earnings - in particular, what's left over after your monthly expenses
• Your debts - for example, a mortgage, personal loans or other credit cards
• Your current credit – the limit on any credit or store cards or overdrafts you have available 
• Your repayment history - whether you've missed payments on debts in the past

Their goal is to offer you a credit limit that they're confident you can afford.

If you make a purchase that pushes your debt beyond your credit card limit, the credit card provider may decline the purchase but on some occasions may let it go through.

If you do go over your limit it can have consequences. You'll normally be charged a fee. There may also be longer-term effects. Going over your limit could damage your credit rating and, if it happens repeatedly, lead to your credit card provider lowering your credit limit or closing your account altogether.

Usually you can request to increase your credit limit by contacting your card provider. You'll need to tell them the new credit limit you'd like. They will then look at your card use and credit history to make a decision. They may approve the credit limit increase, offer a lower increase or refuse altogether.

The card provider will have a policy on credit limit increases. Some only offer an increase once you've had the card for 6 months or a year.

You can also request to decrease your credit card limit. Reducing your unused credit can make it easier to get a loan or mortgage, as you will be reducing the amount of other credit you have available. It may also help reduce any temptation to spend.

If you do want to increase your credit card limit, there are some things you can do to help improve your chances:

• Never miss a payment - even paying your credit card bill one day late could impact your chances of getting a credit limit increase in future
• Give it time - the longer you've had your card, the more likely you are to get a credit limit increase
• Use your card regularly and sensibly, without going too close to your credit limit 
• Don't ask too often - requesting a credit limit increase too many times can affect your credit score