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Key takeaways
- It's a good idea to take as much credit as lenders will qualify you for, if you can use it responsibly and pay it off monthly
- You should aim to keep the amount of your total credit line you use, or your credit utilization ratio, below 30 percent
- Keep in mind your interest charges on unpaid balances, as well as other fees, also count as part of your credit limit
- If you go over your total available credit, your card will be declined unless you have opted into over-limit protection
How much credit should you have? It really depends on what you do with it. Since your credit score is tied to the percentage of your available credit that you’re currently using, it’s a good idea to accept as much credit as lenders are willing to offer you — as long as you pay off your balances regularly and keep the amount of credit you’re currently using below 30 percent.
If you have trouble paying off your balances or consistently run up against your credit limit, you might want to avoid taking on additional lines of credit to reduce the risk of escalating debt. However, if you’re managing your credit responsibly, asking for a higher credit limit or opening a new credit card can be a smart move. In fact, increasing your available credit is a great way to increase your credit score.
What is a credit limit?
A credit limit is the maximum amount of money you are allowed to borrow from a line of credit. If you have a credit card with a $5,000 credit limit, for example, you can carry a balance of up to $5,000 on that card.
What happens if you go over your credit card limit? It depends on whether you’ve opted into what is commonly called “over-limit protection.” If you haven’t opted in, your credit card will be declined and the charge won’t go through. If you have signed up for over-limit protection, your charge might go through — but you will likely also get hit with an over-limit fee.
Some people don’t realize that interest on unpaid balances also counts towards your balance (as do fees and penalty charges). You may think that you’ve only made $4,000 in purchases on a card with a $5,000 limit, for example, but if you’ve only been making the minimum payment each month, your credit card’s interest could start pushing you closer and closer to your credit limit.
How much credit should you have?
Credit card issuers determine your credit limit in one of two ways: either they offer credit cards with predetermined credit limits (which means that everyone who gets accepted for the card is offered the same credit limit) or they give you a customized credit limit based on your credit history and your credit score.
Either way, the amount of credit available to you is probably going to reflect your current credit health. If you have bad credit, for example, you’re probably only going to be eligible for credit cards with low credit limits. If you have good or excellent credit, you’ll probably be offered significantly higher lines of credit — and you can also request credit limit increases if issuers aren’t already boosting your credit limit on a regular basis.
There’s no one answer to the amount of credit you “should” have. It’s a good idea to accept as much credit as lenders are willing to offer you, as long as you’re in a position to use that credit responsibly.
How much credit should you use?
Although it’s to your advantage to have as much credit as lenders are willing to give you, that doesn’t mean that you should use all of your available credit. In fact, using too much credit could hurt your credit score.
Why? Because 30 percent of your credit score is determined by your credit utilization ratio. This ratio represents the amount of credit you have available to you versus the amount of credit you are currently using. For instance, if you have $10,000 in available credit and a $5,000 balance, your credit utilization ratio is 50 percent.
To gauge whether your card balances are dampening your credit score, check out Bankrate’s credit utilization ratio calculator and take the next steps toward improving your financial opportunities.
One of the best ways to improve your credit score is to lower your credit utilization ratio. A good rule of thumb is to keep your credit utilization under 30 percent. This means that if you have $10,000 in available credit, you don’t ever want your balances to go over $3,000. If your balance exceeds the 30 percent ratio, try to pay it off as soon as possible; otherwise, your credit score may suffer.
If you use a credit monitoring service to track your credit score, you might notice that your credit score goes up or down by a few points every time you use or pay off your available credit.
The bottom line
There’s no magic amount of credit that a person “should” have. Take as much credit as you’re offered, try to keep your credit usage below 30 percent of your available credit and pay off your balances regularly. With responsible use and better credit card habits, you can maintain a good credit score.
FAQs
What is the ideal amount of available credit? The ideal amount of available credit to shoot for is any amount over 90 percent of your credit limits. For best results, you should strive to maintain $9,000 in available credit or more for every $10,000 in credit limits you have.
What is a good amount of credit to have available? ›
There's no magic amount of credit that a person “should” have. Take as much credit as you're offered, try to keep your credit usage below 30 percent of your available credit and pay off your balances regularly.
Does having too much available credit hurt your score? ›
Can Too Much Available Credit Hurt Your Score? There's no such thing as too much available credit when it comes to your credit score. As the data suggests, people with exceptional credit use only a small fraction of what they have on their credit cards, and that has helped their credit scores.
How much credit does the average person have access to? ›
How many credit cards does the average person have? According to the latest figures from Experian, the average American has 3.84 credit cards with an average credit limit of $30,365. And their credit journey usually begins early, with the average Gen Z consumer having 2.1 credit cards.
What is a good total credit limit? ›
As such, if you have one of these cards, you might consider a $5,000 credit limit to be bad and a limit of $10,000 or more to be good. Overall, any credit limit of five figures or more is broadly accepted as a high credit limit. The main exception to the usual credit limit rules are secured credit cards.
Is it good to have 100% credit available? ›
Experts recommend keeping your credit usage under 30% of your credit limit, and ideally below 10% for top credit scores. That means your available credit should equal somewhere between 70% and 100% of your total credit limit.
What is a realistic credit limit? ›
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
Is it bad to have a lot of credit cards with zero balance? ›
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
Is 20k credit limit too much? ›
Yes, $20,000 is a high credit card limit. Generally, a high credit card limit is considered to be $5,000 or more, and you will likely need good or excellent credit, along with a solid income, to get a limit of $20,000 or higher.
How to get 30k credit limit? ›
How to Get Approved for a High Limit Credit Card
- Improve your credit score: High limit credit cards typically require good or excellent credit. ...
- Increase your income and reduce your debt: The higher your income is, the better chance you have of getting a new card with a high initial credit limit.
What is the average credit score? The average FICO credit score in the US is 717, according to the latest FICO data. The average VantageScore is 701 as of January 2024. Credit scores, which are like a grade for your borrowing history, fall in the range of 300 to 850.
What is a good credit score by age? ›
How Credit Scores Breakdown by Generation
| Average FICO 8 Score by Generation |
|---|
| Generation | 2022 | 2023 |
|---|
| Generation Z (ages 18-26) | 679 - Good | 680 - Good |
| Millennials (27-42) | 687 - Good | 690 - Good |
| Generation X (43-58) | 707 - Good | 709 - Good |
2 more rows| Average FICO® Score By Age Group In 2022 |
|---|
| Generation Z (18 – 25) | 679 |
|---|
| Millennials (26 – 41) | 687 |
| Generation X (42 – 57) | 706 |
| Baby Boomers (58 – 76) | 742 |
1 more rowSep 29, 2023
You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.
Why is my available credit so low? ›
Why is my available credit less than my credit limit? You can think of available credit as your credit limit minus your current balance. If you have outstanding charges on your credit card, they will reduce your available credit.
Is a $3000 credit limit good? ›
A $3,000 credit limit is good if you have fair to good credit, as it is well above the lowest limits on the market but still far below the highest. The average credit card limit overall is around $13,000. You typically need good or excellent credit, a high income and little to no existing debt to get a limit that high.
Is a $500 credit limit good? ›
A $500 credit limit is good if you have fair, limited or bad credit, as cards in those categories have low minimum limits. The average credit card limit overall is around $13,000, but you typically need above-average credit, a high income and little to no existing debt to get a limit that high.
Is 50000 available credit good? ›
Yes, a $50,000 credit limit is very good, as it is well above the average credit limit in America. The average credit card limit overall is around $13,000, and people who have limits as high as $50,000 typically have good to excellent credit, a high income and little to no existing debt.
Is 7 credit cards too many? ›
So, while there is no absolute number that is considered too many, it's best to only apply for and carry the cards that you need and can justify using based on your credit score, ability to pay balances, and rewards aspirations.
