Credit limits are just as personal as credit scores, and depend on various factors like credit history, income, employment status, and current debt. Typically, new credit card applicants are given small credit limits.
A credit limit of $500 to $1,000 is average for a first-time credit card, but it can be higher if you have, say, a history of on-time car payments on your credit report. On the other hand, unemployment or low income can contribute to a lower credit limit.
Average credit limit for new credit card holders
Many first-time credit card applicants are young, which means they often don’t have the strongest credit history. Income also tends to increase with age. Both of these factors are detrimental to newcomers to credit seeking high credit limits.
However, it is possible to have good credit without having used a credit card. Car payments, student loans, and being an authorized user on someone else’s card can all contribute to your credit score and increase your credit limit on your first credit card.
- good credit: If you have good credit, you are more likely to be approved for a higher credit limit than someone with fair or poor credit. But even with good credit, the average credit limit you can expect to get on a first credit card is usually between $500 and $1,000.
- Average credit: If you have fair credit, expect a credit limit of around $300 to $500.
- bad credit: Credit limits between $100 and $300 are common for people with bad credit scores. This is because people with bad credit are considered to be at high risk of defaulting or not repaying their balance.
Not sure where you fall in the credit range? You can check your credit score for free (and with no impact on your score) through several services, like American Express MyCredit Guide and CreditWise from Capital One.
How your credit limit is determined
As mentioned, credit card issuers use several metrics to determine the risk of lending to you. Here are some factors that help issuers determine your credit limit.
- Your credit history: Better credit works towards a higher limit.
- Income and employment: Regular income from a full-time or part-time job sounds good to lenders. Of course, the higher the income, the better.
- Your debt: Unfortunately, even “good” debt like student loans can work against you.
- The type of card: Traditional credit cards allow the issuer to set the credit limit. But if you have cash you can stash away, a secured credit card offers more flexibility. Secured cards require a cash deposit up front, which will usually be equal to your credit limit. Since you generally don’t have access to credit beyond the money you provide, secured cards aren’t for people who really need to borrow money. Rather, they are intended for people with bad credit who are determined to improve it.
How to get a higher credit limit
Not only does a higher credit limit give you more buying power, it can also boost your credit score. Maxing out your credit card is bad for your score, and a higher limit will give you more wiggle room.
According to the latest data from Experian, the average credit card limit is $30,365. That’s a pretty big jump of $500. So how do you increase your credit limit?
If your application is approved but you are unhappy with your credit limit, you can call your issuer to request an increase. However, you probably won’t change your decision unless you have new information, like a higher income, for example.
You’re more likely to get a higher limit after you’ve had your first account for a while. With a timely payment history, not only will your credit score improve, but your financial institution will begin to trust you more.
Another way to get access to more credit is to apply for another credit card. While one issuer might not be comfortable increasing your credit limit from $500 to $1,000, another issuer may be willing to give you a new card with a $500 limit. The effect – combined credit limit of $1,000 – is the same. Keep in mind that it’s best to wait six months (at least 90 days if not) between credit card applications.
