These are the four major factors that determine how much high your credit limit may be.

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Have you ever wondered how credit card companies decide whether you will have a $1,000 credit limit or a $10,000 limit on a new credit card? Maybe you earn a high income but usually receive a lower credit limit – or you don’t earn a huge amount of money but always receive a high credit limit when you apply for new credit cards.

When a credit card issuer approves your application, the company determines your credit limit – the maximum amount you’re allowed to charge – on the new card. If you charge over that limit, you may have to pay a fee or repay the over-the-limit amount immediately.

But what if your new credit card offers a lower credit limit than you think you deserve, or you want to take steps to start receiving a higher credit limit on your credit cards?

1. Credit score

Creditors look at your credit score, along with other factors, to determine whether to approve or deny your credit card application. But your credit score can also affect the credit limit you receive when approved for a credit card, according to major credit bureau Experian.

The better your credit score, the better your chances of the credit card issuer offering you a higher credit limit. “In general, many lenders find scores above 670 as indicating good creditworthiness,” according to FICO, which calculates credit scores based on various aspects of your credit information. “Typically, the higher your score, the lower the risk and the more likely creditors are to lend to you.”

Find out: 7 Questions to Ask Before Requesting a Credit Limit Increase

2. Income and expenses

Just because you earn six figures annually doesn’t mean you will automatically receive a high credit card limit from the credit card company. Earning $10,000 a month may look good on paper, but even that high salary may not be enough to guarantee a generous credit limit if your monthly expenses eat up most of your income.

Fortunately, you have some control over your monthly income and expenses. If you’re barely scratching by, ask for a raise, more hours or a promotion. Maybe secure a higher-paying job.

As for all those expenses, take a look at what you can eliminate to decrease monthly costs. You could pause or cancel streaming or other subscriptions, for example. When your car is eventually paid off, hang on to it for a few more years instead of purchasing a new vehicle that comes with hefty car payments.

Find out: Can a Credit Card Company Cut My Limit Without Notice?

3. Debt-to-income ratio

Credit card companies weigh your debt-to-income ratio when deciding whether to approve or deny your credit card application, according to Experian. Generally, if your debt-to-income (DTI) ratio is more than 40%, that can indicate to the credit card company or another lender that you could have trouble paying all your other debts and the credit card’s monthly payment, too.

Here’s an example of how to calculate your debt-to-income ratio. Let’s say you earn $6,000 a month, and the total amount of your mortgage balance, credit card debt, auto or other loan payments comes to around $4,000 a month. Your DTI ($4,000 ÷ $6,000 = 66%) is 66%, a high ratio that could prompt a credit card issuer to deny your application.

Even if the credit card company approves your application, a high DTI typically affects the amount for the card’s credit limit. To start receiving higher credit limits, or possibly even increasing the credit limits on the cards you have now, pay off as much debt as you can, so your  DTI is lower, making you seem like a better risk to credit card issuers.

Find out: Debt-to-Income Ratio Explained in Plain-English

4. Credit utilization rate

Your credit utilization rate – the ratio of revolving debt to your available credit – accounts for around 30% of your credit score, so that factor also plays a big part in whether credit card companies approve your application. But that rate also factors into the amount of your credit limit.

That’s because credit card issuers want to make sure you can make timely payments, and the more recurring debt you have, the greater the chance of you missing a payment. With a high credit card utilization ratio, you also look like a candidate for getting into debt over your head, making late payments or missing payments.

To improve your credit utilization ratio, start chipping away at your debts, hitting one at a time harder than the rest so you can make significant progress and stay motivated to pay off the remaining debt.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

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