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How Much of My Credit Limits Can I Use Without Damaging My Credit Score?

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You know that your credit score is based on how well you can pay back your credit card bills. So how do we know when we’ve spent too much to pay back? Thank heaven for credit limits. We set these limits so that we do not exceed the amount that we know we can easily afford to pay back. So how close can you get to your limit before it starts to damage your credit score? Here are a few tips to help you understand how much you really should spend within your limit in order to maintain a good reputation in the credit world.

DO NOT go over your credit card limit

No matter how much you want to pay for that riding lawn mower with your credit card, even if it costs more money than you have within your limit, don’t do it! Going over your limit can cause your credit score to go plunge dramatically. Even calling in to the credit card company and prearranging an expense that will exceed your limit will not excuse you from the penalties. If the credit card companies authorize you to go beyond your limit it may exempt you from getting your interest rates heightened, but you will still be subject to the consequences on your credit rating.

Spend only up to about 50% of your credit limit, then pay it off

Sometimes the best way to ensure that you do not go over your credit limit is to set a goal that you will pay off your credit card bills once you have spent half of your limit. That way you will not even get close to maxing out. This also helps you to keep your monthly dues at a reasonable amount, allowing you to pay them easily and on time. Being smart and conservative with your money will show that you are responsible enough to pay your debts, allowing for your credit score to steadily improve over time.

Don’t set your credit card limits too high

You should set your credit limits to an amount that you know you will be able to pay back. Having a limit that is too high puts you at risk of spending more than you can afford to make a monthly payment on. It may be somewhat beneficial to set your limit a little bit above your afford ability in order to keep from getting too close to exceeding it. But having a credit limit that is too high for you to ever be able to pay back lulls many into believing that just because they don’t go over the limit means that it’s okay to go up to that amount.
The main thing to remember when you set your credit limits is that your credit score can benefit only if you do not exceed your limit, and if you pay off your debt before you get too close to that limit. Credit cards can either help or hurt you, depending on how you manage them.