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

You might think that spending more means you have more experience handling debt and could entice your credit card company to increase your limit, but this is not always the case. Actually, credit card debt is usually a bad thing for credit scores and overall financial health.

Effect on Credit Score

Spending more on your credit card will always lower your credit score. Credit bureaus factor in your "credit utilization," or how much of the total limit on your revolving debt you have available. If, for example, you have a total limit of $1,000 and use $500 of that, you have a credit utilization ratio of 50 percent. Kiplinger Personal Finance recommends a credit utilization ratio of no more than 25 percent, and less is always better.

Effect on Credit Limit

Most credit card companies set your credit limit based on your yearly income and credit score. Spending more on your card may prove counterproductive to getting a limit, because it lowers your credit score and the lender may see an increased debt load as a credit risk. Alternatively, lenders shy away from increasing limits for people who rarely use their card, because they are unlikely to need or increase this credit. In this case, spending more could lead to a limit increase, but only if you have history of responsible borrowing.

Considerations

Take a look at your financial situation and determine if you can afford more credit card debt. Spending more could lead to default. Credit cards often have the highest interest rate for any consumer loan, so unless you plan and are able to pay the balance off every month, the benefits of a potential limit increase are minimal.

Tip

Instead of spending to try to get a limit hike, just ask the credit card company to raise your limit. Some credit card issuers offer automatic limit increases on their website. When that fails, you could always call the customer support line and request an increase. The company will likely ask if you had any change in your salary, so a promotion or wage raise since your initial application boosts your chances. Before asking for any limit increase, inquire about whether or not the company performs a hard inquiry on your credit. Hard inquiries will ding your score by three points to five points.