…These have a fixed number of payments and often have interest rates tied to federal rates. Credit cards are classified as revolving credit. With revolving credit, you can borrow up to a pre-approved amount (line of credit). At the end of the statement period (usually a month), you are required to make a minimum payment towards your balance.

Your Credit Score

Your credit score is a standardized way for lending institutions to take a snapshot of your credit history. When a potential lender pulls your credit report, they can see flagged items such as late payments, missed payments, how long you've had credit and your low credit to debt ratio. Bad credit indicates to a lender that you may not be able to make your payments. In order to mitigate this risk, a lender will allow you a lower line of credit and charge you higher fees and interest.

Your Ability to Pay

Another factor that lenders will consider is your ability to pay. When applying for credit, institutions will often ask for proof of income (pay stubs or W-2s) and assets (bank account and portfolio statements). By showing that you have several sources of capital to draw from, you are more likely to get favorable terms on your loan. While these are the main areas a lender examines when determining how much credit to give you; each institution and circumstance calls for different factors to be considered- some of which are only divulged and understood within the industry. But a good general rule of thumb is to use your credit responsibly and with moderation to stay out of debt and keep a clean credit report.