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Understanding Credit Limits and Their Impact on Your Finances
Credit Limits Rise More for Those With Good, Very Good Credit
An analysis of the consumer credit card landscape reveals that while credit card balances have increased in recent years, the average credit extended to consumers hasn’t matched this spending growth. Since 2022, average credit card limits have grown by 4.4% annually, but spending has surged at nearly twice that rate, from $5,699 in 2022 to $6,699 in 2024—an 8.4% annual increase.
Average Credit Card Balances and Credit Limits Since 2022
| Year | Average Credit Card Balance | Average Credit Card Limit | Annual Growth Rate (2022-2024) |
|---|---|---|---|
| 2022 | $5,699 | $31,165 | 8.4% |
| 2023 | $6,365 | $32,815 | |
| 2024 | $6,699 | $33,980 | 4.4% |
Source: Experian data as of Q2 of each year
How FICO Scores Inform Your Credit Limits
Experian data indicates that credit limits are not distributed equally among consumers. A consumer’s FICO® Score can significantly impact their credit limit. For instance, those with fair credit scores (580 to 669) received smaller credit limit increases compared to those with good and very good credit scores (670 to 799).
Average Credit Limit Change in Dollars, 2022-2024
Lenders consider multiple factors when deciding credit limits, but credit scores are a major determinant. The data shows that credit score and economic conditions largely influence how much credit is extended. In 2023, credit limits saw double-digit percentage increases for those with lower credit scores, but in 2024, credit limits were reduced across all credit scores.
Average Credit Limit Increase by Score Band, 2023 and 2024
Consumers with FICO® Scores below 740, especially those below 670, are revolving more in credit card balances than they are receiving in new credit, increasing their credit utilization ratio. Generally, consumers with good or better FICO® Scores have an average credit utilization ratio below 30%, while those with fair scores have an average ratio of 61% as of June 2024.
Higher Credit Scores Are One Path to Higher Credit Limits
New credit card spending and additional revolving balances are putting financial pressure on some consumers. With average credit card APRs near 23%, interest charges are a larger part of statement balances than two years ago. This is particularly concerning for consumers with less secure financial footing, who may have limited discretionary income after paying monthly bills.
Retailers have noticed these spending trends, leading to reimagined value meals and declining sales expectations. Despite low unemployment rates, elevated credit card APRs remain a challenge. Even anticipated rate cuts may not significantly alleviate this issue. For consumers with high credit utilization ratios, reducing debt balances can improve FICO® Scores, potentially opening doors to more cost-effective debt reduction methods like balance transfers and personal loans.
For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. Our team is here to help you navigate your financial journey with expert advice and personalized solutions.
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