Credit - General

The purpose of credit is to allow people to buy now and pay later. How is credit worthiness determined? Do I have good credit? How are my credit limits determined? How do I increase my credit limit? All of these questions will be answered in the sections below.

How is credit worthiness determined?

Typically your FICO score is used as the primary variable in determining credit worthiness. ie. The higher your FICO score, the higher your credit limit. (raising your FICO score). Other variables companies take into consideration is how many lines of credit you currently have open, limits other companies have given, how many years you have had a record with the credit bureau, your current income, etc.

Do I have good credit?

Credit worthiness is correlated to FICO score. The higher your FICO, the better your credit. A rule of thumb is: a  person that continues to make payments on the credit cards, loans, and bills (rarely/never pays late fees) and has both a checking and savings account has good credit; a person that cannot/does not always make their payments on time and has a checking or savings account is mediocre; a person that usually makes late payments or doesn’t pay their bills, has neither a checking nor savings account, or has had a bankruptcy, a lien, or a foreclosures can be classified as not so good credit.

How are my credit limits determined?

Companies primarily use your FICO score, income, and past credit history to determine credit limits (past credit history is indicated within FICO scores). Income is used because companies do not want to give out more credit than can be paid back over. For example,

a person who makes minimum wage would probably not be able to pay back a debt of $200,000.

How do I increase my credit limit?

Initially, when a company has no credit file, credit limit is a factor of FICO and income. If your income has increased, you can call your credit company to reconsider your credit line. Or by request, companies will allow credit limits to be increased after your reliability has been established (approximately 6-12 month after account opening).

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