Credit Limit or Credit Line

Credit limit or credit line summary:

• Credit cards, personal lines of credit, and HELOCs all come with a credit limit or line, which tells you how much you can spend on the account. 

• You can pay down your balance and spend again. 

• Keeping your balances low relative to your credit limits or lines could have a positive impact on your credit score. 

Credit limit or credit line definition and meaning

When you’re approved to borrow money in the form of a credit card, personal line of credit, or HELOC, the lender will give you access to a credit limit or credit line. This is the maximum amount of money you can spend. 

Once you pay it back, your credit limit or credit line is freed up and you can spend and repay the money again. If you go over your limit, you’ll likely pay a fee and your transaction will be declined. 

Key concept: A lender extends a credit limit or credit line on a revolving credit account. Once you spend it, you pay it back and can spend it again. 

Accounts that come with a credit limit or credit line

Only revolving credit accounts have credit limits or credit lines. Installment debt, like personal loans, mortgages, and auto loans, doesn’t. 

Credit card

You’re approved or denied for most credit cards based on your income and creditworthiness. A credit card’s credit limit has no defined draw period. As long as your account remains in good standing, you can spend up to your credit limit, pay it all back, and spend again whenever you want to. 

Your credit card issuer may increase your credit limit without being asked—and sometimes it may lower your limit. A credit card company could lower your limit if your financial situation changes or you don’t use the card. You can request a credit limit increase by phone or on the card issuer’s website. 

Personal line of credit

You can apply for a personal line of credit with a bank or credit union. Like credit cards, they are usually unsecured, meaning they’re not backed by collateral and you qualify based on creditworthiness and income. You'll get a credit line you can use and pay back. You typically have three to five years to borrow, then you must pay it back.  

Home equity line of credit

A home equity line of credit (HELOC) is different from credit cards and personal lines of credit because your home guarantees the money you borrow. This makes a HELOC a secured loan and a second mortgage. The amount of money you’re approved to borrow is based on your home equity and other factors.

HELOCs come with a draw period, often five to 10 years. When this ends, you can’t borrow more. The repayment period varies depending on your lender—at Achieve Loans, you can opt for a repayment term between 10 and 30 years. 

Credit limit or credit line and your credit score 

Your credit profile impacts how large your credit limit or line is—and how you use it can also impact your credit profile. In the case of a credit card or personal line of credit, your creditworthiness is a major factor in how much you can borrow. 

If you keep your spending low on your credit limit or credit line and pay the money back promptly (ideally, paying off your balance every month), your credit score is likely to rise. Payment history and how much money you owe are the two biggest parts of your FICO Score.