How Do They Determine My Credit Card Limit?
The purpose of a student credit card is to get a company to credit you a loan for a certain period of time. Along with this student credit card comes a credit limit. How do they determine this credit limit Just follow along and I will try to explain.
The first thing that you need to do is find a student credit card that you would like to apply for. From there, you will need to be accepted from the student credit card company. This will probably be the hardest part out of all the steps. Current credit, debt to income ratio, and other factors will be the determining factor to you being accepted or not.
Once you have been accepted for a student credit card program, the company will then determine how much credit they are going to let you carry. This is called a credit limit. This limit can raise or lower over a course of time depending on how you use your student credit card. If you pay your bill off on time every time, most likely you will receive an increase rather than it being lowered. If you have fail to do this, your credit limit can be drop and your interest rate may even increase.
Let us look at what student credit card companies look at when determining what your limit will be.
Your Monthly Income: This is probably the biggest one. They want to see exactly how much you make to see what limit is right for you. They do not want to give you a $3,000 limit if you only make $300/month. However, with a student credit card this criterion is different. Most college students do not have a monthly income.
Your Current Debt: These debts usually include car loans, college student loans, mortgages, and other credit card bills. The more debt you have, the more doubtful the credit companies will be in giving you a decent limit. The less debt you have, the higher your credit limit could be.
Length of Your Residency: This may not seem like a big deal, but companies want to make sure you are not jumping from one expense to another every other month. This could raise red flags because it is likely you are either being evicted or you cannot afford to pay those rent payment. However, you may move because of job purposes, but companies tend to like you to stay at your residence for more than a year or two.
Other Credit Cards You Own: The more student credit cards you own, the less likely you are going to be approved for one with a high limit. Because you have access to all of this credit, nothing can stop you from running it up and declaring bankruptcy. Banks are very careful when it comes to how many student credit cards you do have.
The above four points could be the most important factors when coming down to determining your credit limit. Of course, the more money you make, the higher your credit limit is, and it is that simple. To ensure you receive the highest limit, you do want a nice income, No debt, and a decent length at your current home, and a very limited amount of student credit cards.
Student credit cards.com @ August 2, 2008