Why with a good credit score approved cards with low limits?

Has it ever happened to you? You have an excellent credit score, you apply for a credit card expecting a high limit, but the bank only approves a modest line. You’re not alone: it’s a common challenge that baffles many consumers. In this blog, we explain the reasons behind this phenomenon and what you can do about it.

Card issuers analyze much more than just your score: they consider your history, income, debts, and more when deciding your limit. Below, we detail the key factors that can lead to low limits despite a good score and provide practical recommendations to improve your chances of obtaining higher limits in the future.

1. Lack of credit diversity

Having a high score based solely on a credit card is good, but it might not be enough to impress banks. Credit diversity refers to the variety of credit types you have handled (credit cards, auto loans, mortgages, etc.).

If your history consists solely of credit cards and lacks other types of loans, the issuer might be cautious. The reason? They haven’t seen how you handle other financial obligations, such as an installment loan or a mortgage, so they are unaware of your behavior beyond revolving credit from a card.

What can you do?

• Consider diversifying your history with other types of credit, such as a small personal loan or auto financing.
• Use these credits responsibly and make timely payments to strengthen your credit profile.

2. Age and credit history duration

The age of your credit history (the time you’ve been managing credit accounts) is another key factor. A good score built over a short period doesn’t carry the same weight as one built over many years.

If you are relatively new to the world of credit, banks might be cautious about granting you large amounts until you build more history. Simply put, a short credit history can limit lenders’ confidence.

What can you do?

• Keep your oldest accounts active to extend the age of your credit.
• Avoid closing old cards, even if you don’t use them frequently.

3. Income history and payment capacity

An excellent credit score indicates that you have managed your credit well so far. But banks also look at your finances. Your income level and financial stability play a huge role in the decision to grant high limits on credit cards.

Issuers want to ensure that you have the ability to pay off a high limit without risks. If you have moderate or fluctuating income, they might limit the amount granted to you, regardless of how good your score is.

What can you do?

• Make sure to accurately report your income when applying for a card.
• If you receive salary increases, inform your bank, as this can improve your credit limit.
• Reduce your existing debts to improve your debt-to-income ratio.

Having a good credit score is important, but it isn’t the only factor that determines your credit card limit. Credit diversity, the age of your history, and your income play key roles in banks’ decisions.

If you have received a low limit despite your good score, analyze these factors and take action to improve your financial profile. With the proper strategies, you can increase your chances of obtaining cards with higher limits in the future.