Credit Limit
The maximum amount a lender allows you to borrow on a revolving credit account (credit card or line of credit). Exceeding your credit limit can result in fees and score damage. Higher credit limits (with low balances) improve your credit utilization ratio.
Related guides
- Full credit & FICO® glossary
Browse all defined terms by category.
- Credit Utilization
The percentage of your available revolving credit (credit cards, lines of credit) that you're currently using. Calculated by dividing your total credit card balances by your total credit limits. Accounts for 30% of your FICO score. Lower is generally better; keeping utilization below 30% is a common guideline, while below 10% is ideal.
- Revolving Credit
A type of credit where you can borrow repeatedly up to a set limit, repay, and borrow again. Credit cards and lines of credit are revolving. Your credit utilization ratio — a major FICO factor — only applies to revolving credit accounts.
Frequently Asked Questions About Credit Limit
What does Credit Limit mean?
The maximum amount a lender allows you to borrow on a revolving credit account (credit card or line of credit). Exceeding your credit limit can result in fees and score damage. Higher credit limits (with low balances) improve your credit utilization ratio.
Is Credit Limit important for my FICO® score?
Understanding Credit Limit helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.