How lenders calculate your credit limit

• Credit reference agencies do not set credit limits, they only provide the information which lenders use to set their own credit limits. Each lender will have their own criteria and use their own internal guidelines.
  
  
• There are some general guidelines which some lenders may consider along with the information on your credit report. Lenders may calculate a short-term debt-to-income ratio, where they calculate your current short-term debt payments (excluding your mortgage) and divide this by your total annual income. Some lenders may refuse you credit if your short-term debt is more than 20% of your annual income. Another calculation is to add up your monthly bills (not including rent or mortgage and utilities) and divide the total by your gross income (before taxes) and here lenders may look for debt to be less than 35%. These are only guidelines and lenders are frequently revising their processes.