A:

Consumers trying to improve their credit scores are often advised to increase the credit limit on their credit cards. A key factor in the score on a credit report is credit utilization, which considers how much of all available credit is in use. If the ratio of debt to credit is lower, the score for this piece of the credit report is higher. While having a higher credit limit may boost your credit score, be cautious when raising credit limits.

The most obvious reason to avoid having too much credit available is that you could spend more, further increasing debt and actually hurting your credit score if you get in over your head. Think carefully about whether you can resist the temptations involved with a higher credit limit.

A credit limit that is too high could affect your ability to obtain new credit. When a lender reviews your credit report and compares your total available credit with your income, having a credit limit higher than your income can support is a red flag to the credit analyst. For example, if you apply for a $20,000 auto loan with a bank and have available credit of $75,000, but your income is $50,000, the lender sees this as a risk. If it loans you the $20,000, you could theoretically max out your credit cards and be unable to meet all of your obligations. In this scenario, it would be advisable to either use some of the available credit or lower the credit limit to a more reasonable level.

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