Nowadays, people have started using credit cards just as extensively—if not more so—than debit cards. This is because they offer users various attractive benefits, such as reward points and cashback. However, it is important to remember that you can only use a credit card up to a specific limit. But have you ever wondered how this credit card limit is actually determined?

How is the Limit Decided?
A bank, financial institution, or credit card provider determines the credit limit by evaluating several factors:

The cardholder's monthly income (salary).
The nature of their profession or job.
The stability of their employment.

Special Attention is Also Paid to Credit Scores
In addition to the above, the cardholder's spending habits and patterns are closely examined.

For instance, is the credit card being used repeatedly for every single expense?

What is a Credit Score (or CIBIL Score)?
Banks and financial institutions often use a credit score to assess a cardholder's capacity to repay borrowed funds. This is because the score is calculated based on your financial performance—specifically, your repayment patterns for loans or credit card bills.

Aim to Use Only 30%
Experts recommend utilizing no more than 30% of your available credit card limit. Adhering to this guideline helps ensure that your credit score remains unaffected. The *manner* in which you use your credit card also has a direct impact on your credit score.

The true significance of a credit score becomes apparent when you apply for a loan or are planning to take one out. If an individual possesses a strong credit score, they are more likely to secure a larger loan amount at a lower interest rate. Consequently, credit scores hold immense importance in today's financial landscape.

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