Your credit rating will help determine your credit limits and indeed your credit limits will affect your credit rating.
A credit limit is the maximum amount of credit that a potential lender will extend to a debtor for a particular line of credit; for example it is the most that a credit card company will allow a card holder to take out at once on a card and is usually stated in the terms and conditions of the credit card after the application has been approved. In the case of instant approval credit cards the credit limit may or may not be decided with the initial response as the instant response credit card is an indication of credit worthiness but how much credit is available may require human input.
 |
||
| ANZ Low Rate Purchases : 0% for 3mths (Offer ends 12.06.12) then 13.39% p.a. Balance Transfer: 0% for 3mths Annual Fee: $58 Interest Free Days: Up to 55 Cash Advance : 21.49% p.a. More Info |
||
| ANZ Low Rate Apply Now |
Credit limits are based on a variety of factors ranging from an individual’s ability to make interest payments, an organization’s cashflow and/or ability to repay the principal, to the credit standards employed by the lender. A credit limit is also based on the borrower’s recoverable assets in the event of default.
Credit ratings are a always a factor in the credit application process. When applying for credit cards, the credit score is one of the most important factors on whether a credit card will be provided, and what the interest rate and the credit limit that are allowed. However credit cards can also affect credit ratings.Credit ratings affect more than credit cards they have implications for all other credit products such as lines of credit, home loans and personal loans. As well as credit the credit ratings can also affect whether tenancies can be taken out, insurance granted or jobs given. credit ratings are becoming more important every day.
[TABLE=3]
A credit rating is the impression that credit bureaus have of a person based on a large number of factors, largely focussing on their past behaviour towards credit.
The amount of applications for credit cards that a borrower makes, particularly when made within succession of each other can have an impact on the credit rating itself. The implication of frequent applications for credit is that a person is desperate to borrow money and so they are likely to be in, or soon be in financial trouble. This behaviour ( applying for multiple credit cards within a short period of time ) generally raises red flags to the potential lenders, even if the applicant has applied for multile cards just to seped up the approval process.If time is of the essence one is better advised to apply online for an instant approval credit card than to get a response immediately then applying for multiple cards at once.
The ratio of credit being used is a very important factor. If the credit that is offered is almost entirely taken up then this can cause bad marks on a credit score. For example If you have a $4000.00 balance on a card with a $8000.00 limit you are using half of your potential and this is around the maximum you want in order to maintain an impeccable credit rating. A balance of $4,000.00 on a credit card with a $12,000.00 credit limit is a much healthier proportion. The bottom line is the lower the debt credit ratio is the better the credit rating figure will be. In this way lowering the ratio and improving your credit rating can be as simple as requesting a higher credit limit.
Your credit rating will help determine your credit limits and indeed your credit limits will affect your credit rating.
