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How Credit Card Issuers Determine Your Credit Limit in Canada

Credit card companies will set your credit limit through a complicated process known as underwriting, which uses mathematical formulae, extensive testing, and analysis to determine your credit limit. The details of this procedure are kept confidential because it is how the company makes money.

This computation system assists the company in deciding who to approve, at what rate, and within what limits. The larger the credit limit, the more the company’s confidence in borrowers’ ability to repay their loan. Read further to learn the basic principles used by issuers to establish your credit limit.

What is a Credit Limit?

A credit card’s credit limit is the maximum amount of credit that a card issuer will provide to its cardholders. Once an application has been granted, a credit limit, also known as a credit line, is established and can be increased over time by responsible card usage.

Customers can also request credit line extensions over time to accommodate their changing demands.

Cards With Preset Credit Limits

Most credit cards come with a pre-determined credit limit. This implies that once the issuer has assessed your creditworthiness, they will establish a dollar limit on the number of outstanding balances you can have on your account, including new purchases and/or transferred balances.

If your credit score merit it and the credit card provider is prepared to extend additional credit, this fixed limit can be increased over time or at the customer’s request.

Cards with No-Preset Credit Limits

Some charge cards and premium credit cards have dynamic credit limits, which means they can grow or reduce depending on your actual spending habits and behavior.

However, if a significant purchase is expected, a dynamic credit line may accommodate out-of-the-ordinary spending as these forms of credit limits are flexible.

Credit History

To calculate your credit limit, most companies will assess your gross annual income and credit reports. Factors that issuers look at include:

  • The amount of credit accounts on your report
  • your repayment history
  • the length of your credit history

Included in this category are the following:

  • student loans
  • personal loans
  • mortgages
  • auto loans
  • any other type of loan

Issuers also look at how many credit inquiries you’ve made and how many negative marks you have on your credit records, such as bankruptcies, collections, civil judgments, or tax liens. The company will then fund your limit accordingly.

Other Variables

Companies all have various underwriting processes. Some issuers will also look at an applicants’ credit files to see their credit limitations on other cards. Other agencies examine other types of ratings, such as a borrower’s bankruptcy score and credit score, to determine how much they will fund the borrower.

Issuers may also consider the applicant’s job history or debt-to-income (DTI) ratio when determining how much risk the application poses. The more trustworthy a person’s work history is and the less debt they have, the more likely they will obtain additional finances.

How Do Cardholders Request Credit Limit Increases?

The likelihood of getting their credit raised increases for applicants with a track record of responsible usage and payback of any amounts in full on or before the billing due date. Companies usually re-evaluate every six months, and if conditions permit, they may automatically boost credit amounts for applicants.

Some issuers will inform cardholders that they qualify for higher credit limits and invite them to apply.

If a cardholder has been a responsible user, they can request an increase. In contrast, cardholders that make late payments or exceed their credit card limitations are more likely to get their credit limit reduced.


An applicant’s credit limit gets determined by credit card companies through a process called underwriting. The underwriting process differs between companies and usually includes the applicant’s income level, credit score, and credit card performance history.

Cardholders can pay on time and not go over their credit limit to increase their limit. It’s recommended that borrowers increase their credit level and use only smaller amounts to improve their credit scores.

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Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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