Use Credit CardIt is no secret that your credit score is partially based on your spending habits. But is it also affected by what you spend your money on?

Yes, says Lexington Law, a group of law firms. It is called financial profiling. A credit card company that has all your records can easily analyze what you spend your money on. And they do.

American Express spokesman Michael O’Neill says that people’s spending habits are taken into consideration, especially when they appear to be similar to the habits of problem customers.

In other words, excessive spending on drinks or gambling might be seen as a risk by your credit card company. Because that is the way other customers ended up in trouble. But also shopping in the same stores or visiting the same kind of restaurants as customers with a history of problems, might raise a red flag. The credit card company’s assumption on how big of a risk you are, often result in a lower credit limit.

A reduced credit limit is not only inconvenient. It can also damage your credit score. One of the factors in your credit score is how much of your credit you actually use. This is called the utilization ratio. You should preferably not use more than 25 percent of your credit.

With a lower limit, you might suddenly find that your debt is higher than 25 percent, and your credit score might take a hit.

Stay on top by asking questions if your credit limit is reduced. If you have no history of credit problems, your credit company will probably correct their decision.

Also, use your right to a free copy of your credit report once every 12 months from each of the nationwide consumer reporting bureaus: Equifax, Experian, and TransUnion. Your credit score matters! Make sure you know yours. Take actions if you find that your score is hit.

Remember that every bank or creditor set their own standards, not all look at your credit or shopping history the same way.