Does Spending More With a Credit Card Increase the Credit Score or Limit?

Overspending with credit cards can lower credit scores.

Overspending with credit cards can lower credit scores.

The more you keep your spending in check, the higher your credit score is likely to be. You also stand a better chance of getting a larger credit card limit if you keep your spending levels low. That’s because big spenders present big risks to card issuers, who are concerned that large credit card balances won’t be repaid.

Limit Restrictions

Making more credit card purchases could cause your card issuer to lower your limit and keep you from getting credit line increases. Creditors pay attention to your spending habits, and the closer your credit cards are to their limits, the more likely a card issuer is to reduce your credit line and deny you any credit line increases. Creditors tend to view maxed out credit cards as a sign that cardholders are accumulating too much debt. So, they may lower credit lines for cardholders who are close to their limits to avoid having them accumulate more debt than they can repay.

Scoring Issues

You can damage your credit rating by increasing your spending with credit cards. It’s often recommended that cardholders use no more than 35 percent of their credit line, according to Bankrate.com. That means you would have to maintain a balance no higher than $1,750 if you have a $5,000 credit line. The amount of credit card debt you have affects 30 percent of your FICO credit score. You risk lowering your FICO score if you have high balances on your credit cards due to increased spending.

Debt-to-Income Ratio

Credit card issuers also consider your debt-to-income ratio when setting your credit limit. They calculate the ratio by adding up your monthly credit card and loan payments and dividing the total by your monthly, pretaxed income. The more debt you accumulate from increased spending, the lower your limit is likely to be. You may get a higher credit limit and a lower interest rate if your debt-to-income ratio is at 36 percent or less. That's the maximum percentage lenders and creditors generally recommend.

Considerations

You may think you’re safeguarding your credit score if you purchase more with your credit cards but pay them off each month. However, FICO and other credit-scoring models focus on how much credit you use each month, not your credit card payoffs. Creditors are concerned about how much credit you use because an emergency could prevent you from paying off your cards and suddenly put you deep in debt.

About the Author

Frances Burks has more than 15 years experience in writing positions, including work as a news analyst for executive briefings and as an Associated Press journalist. Burks has banking and business development experience, and she has written numerous articles on consumer issues and home improvement. Burks holds a bachelor's degree in political science from the University of Michigan.

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