Why did I get a low credit limit on a credit card?
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There are a variety of reasons you may have been offered a credit card with a low credit limit. To understand why, you can examine your credit report or, in some circumstances, request more information about the decision from the lender.
Credit card companies usually determine your credit limit only after you’ve applied for a credit card. To make this assessment, they generally review your credit report and history as well as the income information you provided on your application.
If you’re issued a credit card with a low credit limit, it could be for a number of reasons, including:
- Poor credit history
- High balances with other credit cards
- Low income
- Small credit limit for that specific card
There are some circumstances in which it is possible to find out more about the factors that went into that determination, including:
- If you were turned down for one card and offered a different card with different terms that you do not expressly accept, the credit card company has to tell you the reasons it denied your application. If the credit card company says you can apply for a different card with different terms than the card you applied for, the card issuer must provide key disclosures about the new offer on or with the application.
- If a card issuer decreases your credit limit on an existing card, the credit card company generally must give you an “adverse action notice.” While card issuers can increase or decrease your credit limit without giving you notice, this adverse action notice must provide specific reasons for the action taken or allow you to request a statement of specific reasons.
In order to better understand the factors related to your financial situation that may have contributed to your low credit limit offer, you can examine your credit report. You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian, and TransUnion). In addition, you can also consider the broader economic factors; for example, during the COVID-19 pandemic, many credit card companies reduced credit limits due to economic uncertainty.