Loans & Credit

What Is a Credit Limit?

A credit limit is the maximum amount a lender allows a borrower to owe on a revolving account such as a credit card or line of credit. It is set by the lender based on factors like income and credit history. The share of the limit in use is the credit utilization ratio.

Available Credit

Available credit = credit limit − current balance − pending transactions.

Limit and Utilization

Because utilization is balance divided by limit, the same balance produces a lower ratio on an account with a higher limit.

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🔗 Related Terms

Credit Utilization Ratio Revolving Credit Credit Score

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.