no you shouldn't increase the card limit. the reason your credit score drops is that your balance on your card or cards just went up past the 10% card usage according to the credit bureau. that's a lot to spend during the holiday times. if you keep your cc down under the 10% that's great. hope this helps
Not exactly correct.
If you increase your limit but do increase your spending/credit utilization, then it should have at least a small positive impact on your credit score as your credit utilization ratio (credit used as a percentage of total credit available) is one input taken into account when computing a FICO score.
With respect to debt-to-income, simply just increasing your credit limit will not change your DTI. The D in the DTI ratio is based on actual debt you have outstanding, not unused credit. Of course if you increase your limit by $10k and then go out and spend the additional $10k in capacity on your credit credit then it will pressure your DTI higher, but simply increasing your limit will not impact DTI.