Credit Limit Definition: A credit limit refers to the maximum amount you can use on your credit card account. The bank or financial institution offering and approving a credit card or line of credit will set the limit based on a customer’s credit history, income, and relationship with the bank or lender.
A credit limit significantly impacts a consumer’s credit rating and scores, and regular payments or delays and missed payments can impact your ability to approve a loan or another credit product in the future. In most cases, lower credit limits are provided to people with a poor or fair credit history. In contrast, a higher limit and more flexible products are offered to people with excellent credit history.