What "credit limit" means in finance

A credit limit is the maximum amount of credit that a lender or financial institution is willing to extend to a borrower. It represents the highest amount of debt that the borrower is permitted to incur, and is typically based on the borrower's creditworthiness, income, and other financial factors. The credit limit is usually expressed as a specific dollar amount or as a percentage of the borrower's income or assets. It is an important factor in determining a borrower's ability to manage their finances and repay their debts on time.