How your credit limit is determined

Why is it that some credit card companies give you a huge limit and others give you just a few hundred dollars? Usually the difference is how the credit-card companies look at you and your ability to pay back credit.

In most circumstances, the better your credit, the higher your credit limits will be. Some credit-card companies will give you a big credit limit immediately, while some more conservative companies wait a few months of on-time payments before they give you a boost.

Credit-card companies monitor your credit status constantly. Although most companies limit credit increase to once or twice a year, they could choose to give you more increases based on your credit.

The bad news about good credit is that you will continue to get credit line increase whether you can afford them or not. Many financial analysts blame the credit card companies in part to the rising debt levels among Americans. Many people have more available credit than they need or could ever repay.

If you have a large amount of credit card debt, you need to ask the issuers not to give you any more credit limit increases. The credit-card companies don’t know your financial status. They are just interested in knowing if you’ve made your payments on time.

Turning down a credit line increase should just take a quick phone call to the credit card company. You may have to follow up with a letter to make sure they actually change your limit. Give them 60 days or so to do it.

Remember, when determining credit lines, card issuers have their bottom lines, not your best interests, at heart. And issuers aren't shy about protecting their bottom lines.