A credit limit is the maximum amount of credit that a financial institution extends to an individual or business. Credit might come in the form of a credit card or line of credit. The amount of credit extended depends on an individual’s creditworthiness. Creditworthiness is a factor of credit history and debt to income ratio, among many other things.
For people with no credit history or those who have poor credit, they can have difficulty when trying to get new credit. Also, interest will generally be higher for such people until they establish or improve their credit. Those with great payment histories, good income, and a low debt to income ratios receive the most credit along with favorable interest rates.
