Limit Testing with Credit Limits

Back when I opened my first few credit cards, on a pure whim, I told myself I would hit a 100k credit limit.

Of course, this was a meaningless number.

I've heard from a few places that having a credit limit that is too high, particularly those above our annual income, can weaken and hurt your score though anecdotally this hasn't appeared to be the case for me.

Regardless, it became a personal goal, and a few years ago I realized I was just one or two cards away from hitting 100k. And a few months ago, I crossed the 200k limit.

Let that sink in for a minute: the ability to borrow 200k across all my credit cards. Ludicrous.

Now, will I ever hit it? Absolutely, not.

Disregarding the fact, that I would not be able to pay it back and thus basically dig myself into personal bankruptcy, the inability to pay it back would hurt my consecutive payments and further drive up my utilization which would hammer my credit score to the point I would not be able to open new accounts.

It’s fun to think I could though.

This leads me to my main point.

Higher than necessary credit limits should not be seen as temptations or budgets to be used up, but rather as safety nets.

In general, high credit limits decrease credit utilization improving and thus improve our credit scores. Furthermore, if we ever did need to make a large purchase, say medical expense or flights for family emergencies, we now can do so without tanking our credit scores.

In a sense, high credit limits are both a temptation and just good insurance. It's pre-emptively acquiring the ability to access money when the going is good so that it's one less thing to worry about when the going gets tough.